Pandemic: No Problem. And Messages From Our Financial Services Providers

Here is what my family is doing to reduce the risk of contracting or spreading coronavirus:

1. Washing hands with greater discipline for 20 seconds per wash. Which is difficult. I'm singing the "Baby Shark" song.

2. Daily disinfecting of frequently touched surfaces such as phones, keyboards, handles, etc.

3. Coughing and sneezing into our elbows.

4. Trying desperately to not touch our faces. Do you know how hard this is?

5. Following CDC guidelines and state recommendations to reduce risk, such as not attending large gatherings. The NHL made that difficult Flyers-Wild game decision for me. Hoping to get tickets for another game.

6. Towelette wipe down of seating area when I fly.

7. Sign up for my health plan's virtual doctor visit portal. In case we need it.

Here is what we are doing to support local businesses:

1.  Keep going to them.

2.  Order online, as most restaurants will either deliver or prepare for pickup.

3.  Highlight brands that are supporting their hourly employees even in lieu of significantly declining revenues.

4.  Highlight charities and wealthier individuals that are supporting the same, such as Kevin Love of the Cleveland Cavaliers donating $100,000 to support arena workers.

5.  Not sniping at politicians because I disagree with them.

6. Not hoarding.

Here are some messages that I have received from various financial firms regarding coronavirus preparedness. Perhaps your pandemic response team would be interested.

Stay safe out there and don't panic!

Genworth

Dear Valued Policyholder:

As COVID 19 (the coronavirus) dominates the news and the stock markets have large movements from day to day, we at Genworth want to reassure you that our associates are well positioned to continue our long tradition of being there for our policyholders regardless of social and economic conditions.

We have proactively taken steps to make sure that our associates are safe, our call centers staffed, and our processing teams are able to function. We have implemented employee travel restrictions, provided associates with tools and technology and have encouraged them to work from home, conducted a deep cleaning of all Genworth facilities and revised our time off and FMLA policy. These changes provide our associates with the flexibility to adapt their schedules to meet our business obligations and limit any service interruptions.
 
Genworth’s high commitment to serving you includes a robust self-service opportunity MyGenworth available 24/7. To sign up, click: https://www.genworth.com/login.html. With MyGenworth, you can obtain current policy status and perform routine policy updates such as address changes and beneficiary updates. Additionally, we encourage you to consider signing up for Electronic Funds Transfer (EFT) for your on-going premium payments as well as policy benefit payments you receive from us on a routine basis. You will find the necessary authorization information under the “Billing and Payments” section on MyGenworth. 

To help you stay healthy and take care of yourself we are sharing some useful third-party resources.

https://www.nahc.org/resources-services/coronavirus-resources/
 
https://www.cdc.gov/coronavirus/2019-ncov/index.html
 
We realize times like these can be unsettling, rest assured we are ready to serve you and value your business.
 
Sincerely,

David O’Leary
CEO, President, U.S. life insurance division

MassMutual

Market Volatility and Your Workplace Retirement Savings     Recent volatility within U.S. and global markets brought on by global health concerns has been historic and unsettling. You're not alone if you have concerns or questions about your retirement savings and investments during current market conditions.           MassMutual is committed to providing you with the power of perspective to help you navigate through these uncertain times.           Things to consider       •   Keep calm. It's not easy, but keep in mind that after downturns, history has shown that markets have recovered and delivered gains in the long-term.           •   Revisit your goals and stick to your plan. Be sure to review your goals and keep your individual needs, risk tolerance and time horizons in mind before making changes to your investment strategy.           •   Stay informed. For up-to-date economic insights and analysis, see MassMutual's regular market commentary.           During market swings, it can be helpful to remember that a diversified and balanced portfolio may be a good defense for downturns and can help position you for potential market recoveries. We're here to help you – so be sure to check out our resources and tools to learn more. Please consider your goals, needs, risk tolerance, and time horizon before making any investment decisions – and consult with your financial adviser if needed.

© 2020 Massachusetts Mutual Life Insurance Company (MassMutual®), 1295 State Street, Springfield, MA 01111-0001. All rights reserved. www.MassMutual.com.   We hope you found this message useful. However, if you'd rather not receive future marketing emails from MassMutual, please unsubscribe. Replies to this address are not monitored.

BB&T/Truist

You're a valued member of the Truist family, and nothing is more important to us than your health and safety.

As the spread of coronavirus, known as COVID-19, continues to be a growing concern across the country, we’re taking extra precautions to protect you, our teammates and the communities we serve. Our Executive Leadership and business readiness teams are monitoring the situation and are in close contact with health authorities, including the Centers for Disease Control and Prevention (CDC), to ensure we’re acting on the latest guidance and information.

We’re Here To Help

If you're negatively affected by the coronavirus situation, we’re here to help. Our branch bankers, relationship managers and contact center teammates are all committed to working with our clients to reduce financial stress during this challenging and uncertain time.

Contact Information:

BBT.com

Find up-to-date branch hours and other information to manage your accounts

800.BANK.BBT | 800-226-5228

Account information is available through our automated phone system 24/7.

As we assist clients and businesses who may be affected by the coronavirus situation, we're also listening and learning from those conversations to help us evaluate and possibly implement additional client relief measures as they emerge.

We invite you to use our convenient digital banking channels and phone banking options to conduct your banking transactions, and when in doubt, always feel free to contact your relationship manager or local branch.

What Our Company Is Doing To Help

• Increasing our focus on disinfecting surfaces including ATMs, teller line areas, elevator touchpads, door handles and other high-touch areas • Increasing the number of hand sanitizing stations available in our branches and offices • Asking teammates who are sick to stay home until they are well • Asking teammates who have recently returned from any high-risk country on the CDC’s Coronavirus Disease Travel Information website, or who live with someone who has recently traveled to one of those identified regions, to self-report to their manager and work from home for at least 14 days • Suspending international air business travel and limiting nonessential domestic business air travel for our teammates • Conducting group meetings by phone or other digital means

Keeping You Informed

We’re committed to keeping you informed through this rapidly changing situation. As it evolves, you can always find the latest information here on Truist.com. Please do not hesitate to contact us if we can be of assistance with any of your banking needs.

For the latest information about COVID-19, please visit cdc.gov or your local health department website.

Navy Federal Credit Union

An Update for Our Members

The spread of the Coronavirus (COVID-19) has all of our attention. I wanted to let you know your Navy Federal Credit Union family is doing everything possible to keep our employees and you, our members, safe while delivering the best member experience possible. What We’re Doing We’re monitoring and following all guidance from the Centers for Disease Control (CDC), including taking the steps necessary to reduce the threat of COVID-19 exposure to employees and members. Our branches remain open to serve you. We have an extensive cleaning procedure in place and can conduct additional cleanings if needed. Some locations have had their hours adjusted as a result of local conditions. For the latest updates on branch hours, you can visit our Branch Closures & Updates page on our website. Our team members are also being reminded to ensure their hands are regularly washed or sanitized. Steps You Can Take Our commitment to world-class, 24/7 member service remains fundamental to our mission. Our digital banking tools are designed to be easy to use. Whether you’re paying a bill through the Navy Federal website, depositing a check, checking an account balance or transferring money using our mobile app, our goal remains empowering you to conduct your business quickly and easily. If you need to access cash, we have more than 700 Navy Federal ATMs around the world, and you have free access to another 30,000 ATMs in the CO-OP Network®. You can find your nearest ATM here. Our Mission Despite the threat posed by COVID-19, your Navy Federal team remains committed to serving you and your families. You are our members, part of our family, and together we will get through this situation. Sincerely, Mary McDuffie President/CEO Navy Federal Credit Union

Radius Bank

A message from Radius Bank on COVID19  

Like you, the team at Radius Bank is monitoring the latest news about the Coronavirus. As a valued client, we understand your concerns and the uncertainty you may be feeling at a time like this.

We wanted to remind you that Radius is a leading-edge digital bank prepared to handle situations such as this, and as a Radius client, you can handle all your banking needs at anytime, anywhere from your computer or mobile device. Our convenient digital tools give you 24/7 access to your accounts.

Once signed in, you'll be able to:

• View transactions and check balances
• Make payments
• Make a mobile deposit (from the mobile app only)
• Transfer funds
• Update your contact information
• See your account and routing number
• Find an ATM
• Send us a secure message

Make sure you have the correct website address bookmarked and the most updated version of our mobile app by following the links below:

Personal Account Clients

• Enroll in Personal Online Banking
• Download the Radius Mobile app

Business Account Clients

• Contact us to enroll in Business Online Banking
• Download the Radius Business app

We're Here to Help!

Questions?

• Visit our FAQ page
• Start a live chat on our website
• Give us a call at 1.800.242.0272 – you can activate your debit card or reset your PIN, check your balances, hear recent transaction history, and transfer funds all from our automated system, as well as speak with a representative
• For our business/commercial banking and lending customers, you may also contact your portfolio or relationship manager

As always, the health and well-being of our customers and team members is our top priority. We will continue to monitor this situation and will be available to assist our clients as needed.

Please visit radiusbank.com/readiness as the situation evolves for the latest updates.

For additional information about COVID-19, visit the Centers for Disease Control and Prevention at CDC.GOV.

Bank Loan Leading Indicators

I recently shared a long ride with a colleague discussing a Capital Plan project we were working on. In Capital Plans, you would typically use baseline projections, usually taken from the strategic plan, and apply adverse events that, based on the bank's balance sheet and strategy, can occur. Even if they are not particularly likely to occur. 

But it's planning. And planning for bad stuff is part of planning. Life isn't all sunshine and rainbows.

As part of our commute discussion, we talked about leading versus lagging indicators of adverse events in order to reduce the impact of such events. Many if not most adverse events are beyond the bank's control. Because risks don't typically come home to roost at the time the Board or Management decide to accept the risk. Lagging indicators are easy, such as the migration from 30-89 days past due, 90+ past due, and non-accrual loans.

But lagging indicators are history. It would've been nice to know that Lee Harvey Oswald was heading to the sixth floor of the Texas School Book Depository. Unless you're Oliver Stone. Then you're wondering who Lyndon Johnson is talking to. I digress. Stopping Oswald or diverting him likely would've ended in a different result.

Can banks identify leading indicators that can reduce risk at the right time?

I was never a lender. And my firm is not in Loan Review or other areas involved with the evaluation of credit. Nor are we an ALCO firm, estimating Interest Rate Risk or Liquidity Risk. But we do Strategic Plans, Capital Plans, Process Reviews and General Advisory that deals with how banks identify and mitigate risk. 

Credit risk remains the greatest risk to a financial institution by far, in my opinion. Not even close. Although examiners and consultants will tick off a laundry list of risks that could put your bank in peril, like reputation risk. The way reputation risk is likely to roost is through liquidity risk. Customers lose confidence in your bank and your liquidity position takes a nosedive. But has many financial institutions suffered as much reputational damage as Wells Fargo recently? And their liquidity ratio is over 40%. They have plenty of liquidity.

No, I'll stand by my credit risk statement. Take the IndyMac domino effect. They had credit problems that came home to roost, Senator Chuck Schumer wrote a letter to the OTS about the bank's problems, and due to the reputation risk customers made a run on the bank. Liquidity is what put them under. Credit is what pushed the first domino.

Identifying leading indicators for credit risk isn't particularly difficult. Finding research that makes the correlation is. But I will list what I think are common-sense leading indicators to credit risk that may very well be effective, and hopefully can be tracked and monitored automatically so we don't have seven risk management analysts on staff hunting and gathering data.

JFB's Credit Risk Leading Indicators

1.  Residential and Commercial Real Estate, and Construction Lending: Trend of days on market (by property type)

2.  Residential and Commercial Real Estate, and Construction Lending: Trend of the difference between initial asking price and actual sale price (by property type)

3.  Commercial and Consumer Lending: Trend of average balance per commercial checking (by NAICS code), and retail checking accounts

4. Residential and Construction Lending: Trend of price index for single family homes under construction

5. Residential, Commercial Real Estate, and Construction Lending: Average checking account balance trends for your customers in the Real Estate Development NAICS

6.  Commercial Real Estate and Multi-family Lending: Trends in occupancy rates.

These are a few that I have seen or make sense to me. Could they be downloaded into a dashboard so bank management could see the trends, and modify risk appetites to curtail new lending in categories that are showing yellow or red? And advise your bank's borrowers on how to navigate difficult times to preserve their business to fight another day?

Do you agree with the above indicators and what others should be considered?

~ Jeff

Netflixed: Co-Founder of Netflix Tells Bankers How It's Done

This past week I attended the American Bankers' Association National Conference for Community Bankers (NCCB). At such affairs, I like attending the general and education sessions for my own knowledge, and for the benefit of my clients and readers.

The NCCB was no different. If there was one session that struck me like a lightning bolt, it was the general session, with keynote speaker Marc Randolph. It was riveting, and challenging. And I'm not too sure bankers are up for the challenge. 

Riveting because he spoke about the founding of Netflix. The idea was not a lightning bolt, as Netflix co-founder Reed Hastings tells of his late fee epiphany when returning the movie Apollo 13. Rather, it evolved during long commutes between Hastings and Randolph. In other words, car pooling planted the seeds of Blockbuster's demise. This factoid is sure to get me social media shares from environmentalists.

The tale of the early years of Netflix is very instructive to an industry experiencing change. Think banking. The talk was challenging because Randolph's keys to being successful in such an environment may, and should scare bankers.

Marc Randolph's three keys to business success:

1.  Tolerance for Risk

Number one is already turning off readers. Low risk tolerance is suffocating. Why? It promotes a "no mistakes" culture. When you have low tolerance for risks and mistakes, you lose innovation. Who will stick their neck out in such a culture? Who will endure five failures to discover that one idea that turns your business model on its head and plants the seed for an enduring future? Bankers may hate the analogy, but Blockbuster was not willing to gut their main revenue source to build out and promote streaming. Does the term "disintermediation" in banking sound familiar?

2. An Idea

And it doesn't have to be a good idea. When Netflix decided to forego late fees their business took off. If Randolph was writing a letter to himself how he thought Netflix would evolve in five years it would not have read like it played out. But they tried anything and everything to get subscribers, and more revenue into their company. They had many failures. The idea wasn't an "in the shower" epiphany. But after trying several things, the one that stuck ended up being the hurdle that would eventually lead to what we have today. An idea. Not a good one. As Randolph mentioned, many of us have great ideas in the shower. Few of us get out of the shower and do something about them. In a culture with a low tolerance for risk, would one of your bankers step out of the shower and do something about their idea? Would such a person even work for your bank?

3. Confidence

It takes confidence to fail several times, and to get up and keep going. As Rocky once said, it's not how many times you get knocked down, but how many times you get knocked down, get up and keep moving forward. That's right, I made a Rocky reference. Say what you will about the Italian Stallion, when he was in the ring, he had confidence to go toe to toe with the best in the business. Think about little $5 million in revenue Netflix, going toe to toe against multi-billion dollar Blockbuster. 

I will close by paraphrasing Randolph. Business success is not about coming up with the best or even good ideas. It's about building a culture to try lots of bad ideas.

And with our own culture in banking, to try few ideas and even fewer that have not proven tried and true, do we have the culture to succeed in a changing industry.

Should we build such a culture? And if so, how?

~ Jeff

Don't Bank. SoFi

After its most recent capital raise in September, SoFi, a marketplace lender that focuses on millennials, has raised nearly $1.5 billion in equity capital since its founding in 2011. By comparison, over 100 year old and $7.7 billion in asset Union Bank & Trust in Virginia had $1.1 billion in equity capital, with a market capitalization close to book value. 

Since 2011, SoFi has funded over $6 billion in loans (through December 15, 2015). And today, they are embarked on a campaign against banks.

Warren Buffett was right when he said "You never know who's swimming naked until the tide goes out." SoFi started in 2011, so the tide has not yet gone out on them. Like most marketplace lenders, SoFi claims a borrower risk rating system that is better than the FICO score. And in fact, is claiming a FICO score free zone. How good is their system compared to FICO, or other FinTechs that feel they are more evolved in credit risk management? We don't know. And I suspect we won't know. Until the next time the tide goes out.

Remember during the depression when the National Housing Act of 1934 created the Federal Housing Administration (FHA). Perhaps not. But during the depression, the typical mortgage was a five year balloon. So when 1/3 of borrowers lost their jobs, they were unable to re-finance when their balloon came due. Forcing them out of their homes. In came the FHA, with mortgage insurance to protect lenders, and the beginning of what is now a 30-year mortgage with a significant secondary market.

The secondary market removes unpalatable interest rate risk from financial institutions' balance sheets. Similarly, SBA guarantees reduce risk for small business lending. Reducing risk by transferring it to someone else is not new.

Marketplace lenders reduce risk for their loans similar to how financial institutions do it for mortgages and small business loans. They transfer it to investors. Many of the investors are other financial institutions! 

Sure, the originating institution retains some risk. I'm not privileged to see the contracts and know if there is recourse back to marketplace lenders for their loans. For financial institutions originating and selling residential mortgages, they retain some risk for early pre-payments or early defaults up to a certain point in time. And for fraud without a time limit. Absent those items, mortgages sold in the secondary market are at the risk of the investors.

So, too, I would suspect is the risk to SoFi and other marketplace lenders. Meaning the lion's share of SoFi swimming naked when the tide goes out is born by those that buy those loans. It is an agency problem that we saw before, in the 2007-08 mortgage crisis, when mortgage brokers and bankers, knowing they were transferring risk, pushed all sorts of loans through the system, so long as they adhered, however loosely, to the investors' underwriting criteria. What was best for the borrower was an after thought, in many cases.

Each recession is different. And certain asset classes are affected differently. In 2007-08, the first asset class impacted was residential mortgages. Banks likely felt it more in their investment portfolio as they were chock full of collateralized mortgage obligations and mortgage backed securities. Fannie Mae preferreds, anyone? 

Next recession may be different. And it will be interesting to see how the portfolios generated by these marketplace lenders perform. And who would actually own those portfolios should they tumble.

Maybe we can create another agency like the CFPB! Something to look forward to.

~ Jeff