Community Bankers Emphasize Calmness, Stability Amid Crisis

You can’t communicate too much during a banking crisis – even when your bank is not the one actually experiencing the crisis.

After regulators shut down SVB Financial Group’s Silicon Valley Bank and Signature Bank two weeks ago, community bankers across the nation began working behind the scenes to field questions from their boards, their clients and their frontline staff. They checked their access to the Federal Reserve’s discount window and sought to reassure customers and directors of their own institution’s liquidity position.

Locality Bank, a de novo bank based in Fort Lauderdale, Florida, still has ample liquidity from its capital raising efforts and simply by virtue of being a new bank. The $116 million Locality, which first opened a little over a year ago, reiterated these points in a letter it sent out to clients the day after Silicon Valley Bank was closed by state regulators, CEO Keith Costello says.

“We don’t have a portfolio of low-interest securities or loans,” the letter reads in part. “We have capital of almost three times the level required to have a well-capitalized rating, and our liquidity ratio at 54.17% at month end of February is one of the strongest in the U.S. Our securities portfolio, because we bought our securities when rates went up, has no appreciable decline in value.”

That letter went a long way toward assuaging customer fears around the ongoing banking crisis, Costello says, adding, “We just got a tremendous response from clients who emailed, who called, who just said, ‘Hey, we love that letter. We feel so much better about everything.’”

Communicating with frontline staff has also been critical, says Julieann Thurlow, CEO of Reading Cooperative Bank in Massachusetts. Not only are those workers spending a lot of time interacting with customers, but they also may have their own questions about how ongoing events impact their livelihoods.

“Not every teller reads The Wall Street Journal,” Thurlow says. “So make sure that you actually communicate with them as well because there was a level of uncertainty … ‘Is the banking community in trouble?’”

Some community bankers also took to social media to get the word out, including Jill Castilla, CEO of $358 million Citizens Bank of Edmond. Since the March 12 failure of Silicon Valley Bank, Castilla has taken to Twitter and LinkedIn to provide a rundown of the crisis and explain how Silicon Valley Bank and Signature differed from a typical community bank.

Even larger banks whose stocks have taken a hit sought to distance themselves from those banks. Phil Green, CEO of Cullen/Frost Bankers in San Antonio, Texas, took to CNBC to discuss the subsidiary Frost Bank’s liquidity position. The $53 billion Frost Bank CEO told “Mad Money” host Jim Cramer that the bank has a low loan-to-deposit ratio and roughly 20% of its deposits are held in highly liquid accounts at the Federal Reserve.

Even though Cullen/Frost Bankers’ stock price has taken a hit this year — down more than 10% since Silicon Valley Bank failed, mirroring the fall in the KBW Nasdaq Bank Index this year — Green expressed confidence in the long term.

“Frost Bank’s deposit base has been very strong,” he said, adding “We’ve seen really no unusual activity.”

While Reading Cooperative already tests its liquidity lines on a quarterly basis, the $796-million bank double-checked its access to the Federal Reserve’s discount window after Silicon Valley Bank failed.

“We could almost refinance the entire bank with our liquidity lines,” she says.

Meanwhile, Costello says that a handful of customers made their accounts joint accounts in order to get coverage from the Federal Deposit Insurance Corp., and he said that Locality also tapped its cash service with IntraFi, a privately held deposit placement firm, for the first time. He also added that Locality’s messaging around the crisis and its own liquidity position and relative stability resonated with non-customers, too.

“You find people that aren’t your clients will call you at times like this, too,” Costello says. “We did actually pick up some business as a result.”

Other community bankers also reported a similar experience picking up new business in the crisis. In a post on LinkedIn, Castilla reported that deposits continued to increase at her bank and “my lobby today is full of happy customers!”

Thurlow says Reading Cooperative picked up a few new larger accounts, although she was also cautious not to characterize that as a “flight to safety.”

“It’s not something that we’re marketing or looking to capitalize on,” she says. “This is a time for calm. We’re not looking to create or exacerbate a problem.”

WSFS Financial and LendKey Partner to Refinance Student Debt


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With over $1.4 trillion in total student loan debt in the U.S., refinancing is growing in popularity as young professionals seek to get the lowest rates at manageable payment terms. With upwards of 44 million people currently paying off student loan debt, refinancing is a trend that’s quickly picking up steam.

For banks, this represents a huge opportunity to help their existing customers refinance student loans, as well as attract new ones. But with established fintech players like SoFi and CommonBond already established in the student debt refinancing space, banks are beginning to develop technology-oriented partnerships to compete in a still underserved market.

Consider the case of WSFS Financial Corp., headquartered in Wilmington, Delaware, which has 77 offices in Delaware, Pennsylvania, Virginia and Nevada. In addition to its core banking services, WSFS realized there was an opportunity to expand its consumer lending portfolio to a new generation of customers—mainly students and recent college graduates.

Given this demographic’s average student debt of $35,000, there was an obvious opportunity for the bank to offer a student loan and refinancing product. At the time, however, WSFS lacked the internal technology resources to gain traction in the market. This, in addition to regulatory and compliance hurdles related to the student lending asset class, led WSFS to seek out a technology partner with experience in the student lending space.

The result was a partnership with LendKey, a lending platform and online marketplace that enables consumers to easily refinance their student loans. New York-based LendKey works with over 300 credit union clients, with a combined loan portfolio of over $700 million, to provide technology that enables consumers to find the best refinancing options at their local credit unions.

“We were interested in partnering [with LendKey] because we didn’t really have a student loan program, and they have a very good one, as well as a good delivery method to get to borrowers,” explains Lisa Brubaker, senior vice president and director of retail strategy at WSFS. “It helped fill our product gap.”

With WSFS’s student loan refinancing offerings available on the LendKey marketplace, WSFS was in position to enter the market with an experienced technology partner. LendKey also allowed WSFS to set the credit risk and underwriting standards for all loans, ensuring a balanced lending portfolio. LendKey helped WSFS’s student refinancing program to comply with all regulations. The new venture was launched once the two companies had agreed to team up.

Initially, WSFS relied on its own internal pricing on student loan products, and although its rates and offerings were solid, WSFS had entered the market rather quietly. The promotional support was light, and pricing wasn’t competitive with many other lenders. During the first two years of the program, WSFS generated less than $1 million in total loan disbursements—not the kind of market traction that was hoped for.

What followed next is indicative of what makes WSFS’s partnership with LendKey so innovative and (now) successful. In 2016, WFSF engaged LendKey’s account management team, seeking LendKey’s expertise on how the program could be more visible and competitive, without significantly impacting credit risk. The LendKey team evaluated WSFS’ competitiveness in the student refinancing market and made some recommendations. In response, WSFS repriced its loan program and placed itself prominently on the LendKey Network, a market for lenders to both directly promote and fulfill refinancing loans. With this pivot, WSFS’s refinancing program became more readily available to borrowers in every state within the bank’s market footprint.

Since the repricing and strategic shift to the LendKey Network, WSFS has been experiencing significant success in the student loan refinancing marketplace. WSFS’s student loan portfolio volume has grown by a whopping 54,000 percent since 2013, the year prior to the initiation of the LendKey partnership. And by performing an initial credit check on all applicants, LendKey is helping WSFS make faster decisions on whether to approve individual borrowers.

Today, LendKey continues to work with WSFS to enhance its student lending products, providing additional data analysis and credit risk reporting. LendKey’s insights-driven approach is enabling WSFS to grow its portfolio and reach new customers in a highly competitive marketing—while simultaneously maintaining strong credit risk controls.

“Our view is to take the best-of-breed from marketplace lenders [like LendKey] to deliver to our customers without losing that personal touch that we value,” Brubaker says.