Charlotte office of the Federal Reserve Bank, or Fed. Photo courtesy of the Federal Reserve Bank
Charlotte office of the Federal Reserve Bank, or Fed. Photo courtesy of the Federal Reserve Bank

With small businesses and households stretched to the limits, large and small banks throughout North Carolina are taking steps to relieve economic pressure triggered by the coronavirus pandemic.

Peter Gwaltney, president and CEO of the N.C. Bankers Association, said that large and small banks are analyzing the risk of each client and have developed a suite of approaches they can use to provide relief to businesses and individuals.

“Our firm belief is the pandemic is going to get worse before it gets better,” he said. “Banks have their eyes wide open and are willing to use every tool they can to get families and businesses through this trough.

“If you’re experiencing difficulty because of the virus, don’t wait until it gets really bad. Call your bank now to explore options.”

[The latest: North Carolina coronavirus daily updates]

Community banks play key role

Gwaltney’s organization works with dozens of community banks throughout the state, such as the Black Mountain Savings Bank, near Asheville, which has five full-time employees and two part-timers and is among just a handful of mutual savings banks in North Carolina.

The bank was established in 1908, and its primary business is to secure its customers’ savings and issue home loans; and like all mutual banks, it is owned by its depositors.

“If you’ve seen ‘It’s a Wonderful Life,’ then you’ll understand the purpose and mission of our bank,” said bank President and CEO Wendell Begley.

“We work exclusively for the citizens of the Swannanoa Valley and don’t stretch our asset base beyond those boundaries. We don’t sell any of our own loans, so if a loan goes bad, we are accountable.

“If someone is having trouble, we ask them to explain their hardship and why they need a payment deferral. Then we do it.”

On a typical day, said Begley, the bank serves about 40 customers. That’s down to about 10-12 since the COVID-19 pandemic impacted the region. Instead, customers are using the drive-thru window, though he’s met with a small number of customers to reassure them that their savings are safe.

A key NC industry

More than 84 banks operate 2,313 branches across North Carolina, employing 81,563 people. Forty-seven of those banks are headquartered in the state. Some banks employ a handful of employees, while others provide jobs to thousands.

According to the Federal Reserve Bank, the nation’s second- and sixth-largest commercial banks are based in Charlotte — Bank of America and Truist Bank — making the city the second-largest banking center in the U.S.

Bank of America employs more than 15,000 workers in Charlotte. Truist, which recently formed from the merger of SunTrust and BB&T, expects to employ 2,000 people at its new headquarters.

Like other businesses during the health crisis, financial institutions in North Carolina — both big and small — are adapting their operational capacity as bank employees work from home.

“Banks are going to take a dip in earnings, but this is not a financial crisis,” Gwaltney said. “This is a health crisis with a financial tail. Banks are the solution to get out of this.”

While lobbies are closed, banks are still open for business and are heading into this crisis well-positioned, he said.

Outlook for banks, NC economy

“Right now large banks are doing well,” said Rich Westerkamp, the senior vice president in the Federal Reserve Bank’s Supervision, Regulation and Credit Department, which supervises large financial institutions. His office is at the Charlotte branch of the Richmond Federal Reserve Bank.

“Each day we’re talking to large banks and asking about their liquidity and we’re monitoring their human capital to determine if they have the adequate staff to manage their risk,” Westerkamp said.

The Federal Reserve Bank, the central bank of the U.S, was established by Congress in 1913. Among its responsibilities is to serve as the lender of last resort, conduct monetary policy and to supervise and regulate banks and other financial institutions to ensure that they comply with rules and regulations. In addition, Westerkamp said, bank examiners serve as a conduit to policymakers to help markets operate in an orderly manner.

Westerkamp said the industry has been preparing for an economic shock like this one since 2010. Stress testing conducted by the Fed, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is used to assess whether large banks have sufficient capital to absorb losses and support operations during an adverse economic shock.

Looking ahead, John Connaughton, a financial economist at UNC Charlotte, said the economic impact of the crisis has been unequal, with airlines, travel and hospitality, some brick-and-mortar retail and restaurants taking the biggest hit.

“Many jobs are being destroyed, but we’re gaining jobs, too,” he said, particularly in sectors of the economy such as shipping, information businesses, online retailing and health care.

“What happens on the way out of this is so uncertain, but it will change the way the economy works.”

In the aftermath of the 2008 financial crisis, banks crawled from the economic wreckage in lousy shape. In Charlotte alone, 12,000 jobs were lost in the financial services sector.

“Coming into the recovery, we had a lending problem. We had zombie banks for several years that didn’t lend,” he said.

This time around he’s more hopeful about the lending sector of the economy.

For one, he said, “The Fed can do things quicker and are a hell of a lot smarter than Congress. The Fed in the last week-and-a-half has been out in front to make sure the financial system can stay the course.”

Partially guarded from politics, the central bank of the U.S has engaged in the massive purchase of private and public securities, known as quantitative easing, and a lending program worth $300 billion, in addition to a promise to set up a “Main Street Business Lending Program.”

In addition, small banks may benefit from the stimulus bill that passed the U.S. Senate. If enacted, it would lower the capital requirement for small banks, allowing them to expand their lending capacity during the coronavirus crisis.

For now, Gwaltney said, employment in the banking sector appears to be stable.

That includes employment levels at Black Mountain Savings Bank, where Begley said he has no plans to alter his staff during the crisis.

“I can’t afford to lose my loyal employees that know what they are doing and whom our customers know,” he said. “We have to demonstrate our stability. Banks have to have the trust of the nation.”

Gwaltney agreed that employees are valuable to the banks.

“Banks have trained and invested a lot in their employees and need them to get back when it is healthy and safe,” he said.

“When we get to the other side of this crisis, the massive amount of money injected into the economy will come through banks to businesses and families. We are fully expecting the economy to surge when we come out of this, but it will take a while to get back to equilibrium.”

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