CEO Q&A: Providing Small Business Lifelines

The first major U.S. city to see a COVID-19 outbreak was Seattle, with its first confirmed case on Jan. 21, 2020, and the first U.S. COVID-19 death on Feb. 26. While the outbreak later became much worse in other parts of the country, Seattle-based WaFd Bank was early to see and respond to the COVID-19 economic tailspin. The $16.2 billion-asset WaFd Bank, which has locations stretching from Washington to Texas, launched a Small Business Lifeline program offering $200,000 interest-free lines of credit to businesses affected by COVID-19—regardless of whether the business is already a WaFd customer. Later, WaFd became a major player in the Small Business Administration’s Paycheck Protection Program, providing 5,500 loans for $750 million at the time of this interview—edited for space—with WaFd President and CEO Brent Beardall.

Q What was your approach to handling PPP loans for previous non-customers?

A That was one of the huge wins. We have one of the highest percentages of non-customers—about 45 percent of our loans were made to non-customers.

Hear the banker stories behind the PPP, including Brent Beardall’s, in our three-part podcast series. Listen now.
Q Did you have any challenges with that? I know some banks said that the Bank Secrecy Act issues associated with non-customers were a hurdle for them. Is that something that you dealt with at WaFd?

A Very much so. BSA is a key point of our compliance program. We worked hand-in-hand with our BSA team. Even before we had customers get into our portal to apply, our BSA team was looking into those customers. We had a waitlist before people applied, and we were actually scrubbing the waitlist and doing what we could do in terms of enhanced due diligence on what might be high-risk customers.

Q What percentage of your overall workforce did you have working on PPP during the most intense weeks of the program?

A Oh, I would say 70 percent of our workforce during the most intense weeks. But your typical bank operations have to go on. During this time we also had [Economic Impact Payments], so you needed to process all those stimulus checks and ACH payments. And you also have the fact that, oh, by the way, we’re in the middle of the next great credit crisis. So we have all kinds of borrowers that are seeking payment relief, and your normal day-to-day jobs are pretty busy to begin with and then we’ll put PPP on top of it.

I just compliment the staff at WaFd Bank and other banks—literally, there are people that are working 18-to-20-hour days for the benefit of the small businesses. What’s really fun is to see how rewarding it is when we are able to connect and help people reaching out—people feel helpless—and as bankers, if we can be part of the solution and provide certainty in uncertain times.

The number of emails I get from people saying, “Brent, I’m typing this with tears in my eyes. Thank you. Thank you. Thank you.” I say, “Well, thank you,” but we’re getting too much credit, right? This is the government’s money they’re giving away here. We’re simply a small piece in that machine, but it feels so good to be part of the solution.

Q What percentage of your workforce was working on this from home, versus being in an office or in a branch processing PPP loans?

A Right now we’re 60 percent from home and 40 percent from branches. We got to the point— because with KYC we still do need to know our customers, especially if they’re new—where new customers would have to come up through a drive in and show us their ID so we could properly identify them.

Q What were the challenges that you had deploying not only this massive program with a huge share of your staff, but doing it in an environment where you have a lot of people working from home or in strange physical circumstances?

A You know the old saying: It’s better to be lucky than good. We were very fortunate in that we were contemplating a remodel of our corporate headquarters, so last June, we made the decision to go to a mobile-enabled workforce. We bought all of our back-office teams laptops, enhanced VPN and invested in Microsoft Teams. Had you rewound a year before that, and we’d faced this pandemic, we would have been in a world of hurt.

Because we made that decision and we had the access, we were able to transition to a virtual workforce fairly swiftly, and I actually think productivity has gone up. One of our bankers said to me, “Brent, we have never been more isolated as a bank, but we’ve never worked better as a team.”

I think this will certainly allow us to be more productive, but I do also think there’s a downside to it, because we’re working our teams extremely hard. I pointed out to our board of directors that one of the risks we face is burnout. I imagine if there are more waves of PPP, at some point it’s not sustainable for our teams.

Q What was your technology back end for deploying the PPP?

A That was one of the huge wins we had going from PPP round one to PPP round two. In March, we had gone live with our nCino platform for commercial loan origination, so we were able to work quickly with their very nimble platform to process our PPP loans. But they at the time did not have, at least available for us, API integration with E-Tran. So we utilized bots—basically computer programs to emulate human beings entering data. I think it took on average about three minutes per loan when you could get through. It was an arduous process to say the least.

When we had the downtime between PPP 1 and PPP 2, we implemented two different APIs from two different vendors, and the bots—and also human interaction for the most difficult, challenging loans. So now we’ve had a great deal more success in PPP 2 in terms of accessing the system. With the interfaces, it takes just a few seconds.

Q The PPP came weeks after WaFd Bank’s “small business lifeline” program to offer $200,000 interest-free lines of credit to businesses affected by COVID-19. You’ve done nearly 1,000 of those.

A Well, the interesting thing is the thousand was numbers that we have in process. The vast majority of those in process elected to go with the PPP loan, which turns into a grant.

I think as bankers, it’s incumbent upon us to try to find solutions and not always just wait for the government. Sometimes the government will come out with a program that’s helpful, sometimes it won’t. But let’s come up with the best available solution in the quickest time possible. Our objective is to try to provide certainly for folks. And I think we’ve done a much, much better job during this cycle than we did in the Great Recession in allowing people time—whether that’s deferments of mortgage payments and deferments on commercial loans, not classifying those as troubled debt restructurings. That is a huge step forward, and then everything we’re doing with the PPP, which is really giving people two months of payroll to try to work through it. If we can give people time, we give them certainty to be able to work through the issues that may present themselves.