Note from Charlie – a banking checklist

August 4th, 2016 Charlie Funk
Charlie Funk

Two months ago, I conveyed four of Jamie Dimon’s thoughts concerning what any bank – large or small – must do to succeed and regain the public’s trust. As I said then, the public’s trust in our industry was shaken by the financial crisis of 2008-10 and Mr. Dimon’s “checklist” seemed appropriate to share. Here, then, are four additional items on his list along with what I consider their applicability to MidWestOne.

Work with individuals who are struggling – both individuals and companies

I doubt that our industry gets the credit it deserves in this area. During the financial crisis, I remember being proud to say that (at that time) MidWestOne served 19 communities and we had fewer than 25 homes that were in foreclosure! That is, less than two homes for each community in which we operated.  And I always hastened to add that this story was not unique to MidWestOne. Why is that? I can think of two primary reasons.

First, for most banks in America, foreclosure is the absolute last option we desire. Hence, our advice to our customers when they get behind on their loan payments is to “work with us and we will work with you.”

What, exactly, does that mean? It means we understand that our customer has difficulty. It means that we will do whatever we can to assure that our borrowers stay in good stead with the bank and, thus, in their homes. Sometimes, that means an agreement that partial payments will be made. Sometimes, it means a new agreement. But the main point is simple: the last thing most banks want to do is start foreclosure proceedings.

Second, each individual deserves courtesy and respect in all dealings with our company. That is non-negotiable. Again, “work with us and we’ll work with you.” We do not, and will not, employ heavy handed collection tactics.

The banking industry received a black eye for the aptly named “robo-calls” that a few institutions made during the crisis. I assure you that the overwhelming majority of banks in America work with struggling borrowers each day and, more often than not, find satisfactory solutions to problems. Our reputation is on the line in each transaction and we take this seriously.

Focus on the customer and treat all clients the way you would want to be treated.

Walk into any MidWestOne location and immediately you will see our mission statement on a wall in very large letters: “Take care of our customers and those who should be.” We know customers are our lifeblood, our raison d’etre. That is why we spend hours and hours and thousands of dollars each year training our staff to respond to various requests and challenges with professionalism. With the significant regulation that we have, it is sometimes easy to forget what really matters.

What really matters is giving world class service and as often as possible, exceeding customer expectations.

Each month, we publically recognize associates who have “taken care of our customers” in an exceptional manner.

Treat regulators like full partners – and accept that you will not always agree.

When they make a change in regulations, even ones you don’t like, accept them and move on.

Ok, I admit it.  This is a tough one for me. But Jamie Dimon is right on.

One of the lessons I have learned in the last ten years is that we as bankers do have the ability to influence regulation and at times we are successful in making needed regulation rational and tolerable. I know very few bankers who believe there should be no regulation. Over the past decade, I have spent countless hours in sessions with our elected officials (primarily in Washington) as well as regulatory agency heads. The purpose of these meetings was to ask for sanity in rulemaking and lawmaking. Clearly, some of these trips worked out better than others!

The main point here is that our industry needs sensible regulation. As bankers, our job is to implement the regulation as efficiently as possible and work side by side our regulators to assure we all do our jobs capably. As an aside, I will say that most of the bank examiners we encounter each year are reasonable, helpful and very understanding.

One thing that bankers should be more vocal about is that regulation is hampering the flow of credit in America today.

Because of what I believe is over the top regulation imposed by the Consumer Financial Protection Bureau, fewer real estate and consumer loans are being made that would otherwise be the case with more even-handed regulation. This does not affect borrowers with excellent or above average credit; it does affect borrowers with average credit or worse.

One of the hallmarks of community bankers for years and years was to extend credit to those who may not have “scored” well in credit tests, but the credit was extended nonetheless because the local bankers knew their customers’ character. That fact that many of these loans are not being made today because of the increased regulation from Washington, D.C. is nothing short of tragic.

As an industry, make fewer mistakes and behave better – the bad behavior of one individual reverberates and affects the entire industry.

If you have read the preceding paragraphs, you see several examples of errant behavior by a few having a devastating effect on the vast majority of banks and bankers that played by the rules every day, every year.

Make no mistake – the bad behavior of the few in the 2008-2010 period still has an effect on how politicians, Washington bureaucrats, the media and the public view our industry.  But, surveys of public opinion the past few years show that slowly and surely, the banking industry is regaining public confidence.

Out here in Middle America, from which this article originates, community bankers are a pillar in any successful community. From little league coach to United Way campaign chair to school board member, our industry contributes to the betterment of any community in which we operate. Over time, this should be the image for our industry rather than an image of a money-hungry “high roller,” which is still portrayed in certain quarters.

Thanks again, Jamie Dimon.  Your roadmap to regain industry trust is a good one. And, one that MidWestOne will continue to follow. After all, we’ve done much of this for the past 82 years.

Charlie Funk

About the author

Charlie Funk is President and CEO of MidWestOne Bank. He works with the MidWestOne team to oversee the daily operation of the bank.

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