Sandra J. Pattie serves as CEO and president of BankNewport, a position she has held since 2012. She is the first female CEO in the bank’s 200-year history and has more than 40 years of experience in the industry. Pattie is a graduate of the Community College of Rhode Island, Providence College, the University of Wisconsin’s School for Bank Administration and the College of Financial Planning at Northeastern University.
What have been the challenges faced by the banking industry during the pandemic and how have they affected your organization? What has been your response to those challenges? Our biggest challenge was meeting our customer needs. Customers still wish to meet in person for a number of different transactions and we can continue to do so through in-person appointments, drive-thrus, our call center and personal teller machines, and more.
It’s very interesting to us that we continue to see transaction volume very similar to 2019, so even though we’ve seen a lot of different methods to connect to our customers, I can’t say we’ve lost any momentum.
The pandemic, of course, is our most visible challenge. We have seen some financial challenges as well, although it’s more in line with today’s interest environment, not directly related to the pandemic. The low-interest-rate environment is favorable to consumers, so customers are borrowing and we’ve experienced an interest in loan originations. That does mean we’re seeing higher-earning assets being replaced by lower-earning assets.
The third item we’re dealing with, which is directly related to the pandemic, is managing credit risk. Banks are seeing a need to increase loan reserves to assist borrowers who have been negatively impacted by the pandemic. But a lot of what we will be seeing in credit losses … we won’t see until next year or even the following year. This is definitely a long-term credit crisis, especially among the hospitality industry.
When the Paycheck Protection Program started, a lot of banks turned away or did not prioritize applicants who were not existing clients. BankNewport, however, accepted applications from these so-called “orphaned businesses.” What made the bank take this approach? BankNewport felt the purpose of PPP was to help all small businesses, not those that happened to already bank with us. We really made the commitment from the beginning that we were there to help our communities in Rhode Island, and it didn’t make a difference to us if someone had already banked with us or not. Thankfully with the second round of PPP rounds that were available, it wasn’t necessary to turn away any businesses that came to us. Any business [that] applied before the final decision was able to get a loan as long as they qualified.
The PPP process has taken a lot of twists and turns that make it hard for lenders to advise their clients, including now with the forgiveness process. Did the changing rules and uncertainties make it more difficult for lenders to advise their clients on best practices/spending? “Lots of twists and turns” has certainly been the case. In general, we advised clients as best we could. However, in a lot of cases we had to direct them to the [U.S. Small Business Administration] Rhode Island District Office or some of the [frequently asked questions] that the U.S. Treasury or the SBA put out. But in a lot of cases, there simply weren’t answers to the questions they had. The [Coronavirus Aid, Relief, and Economic Security] Act that created the PPP program was clear that banks were to have a limited role in vetting and answering specifics of the program. In reality, the banks were just the funding mechanism.
Overall, we feel the program was a tremendous benefit to many small businesses in our community, and we think the positives certainly outweigh the challenges along the way.
Are there ways you think the program could have been structured to make it easier and more efficient for lenders? Honestly, to get funds out in as short of a period as it occurred, no matter what they did, there were going to be items that were going to come up as being unclear. It was so important to have funds in [small businesses’] hands right away. I think they took on a terribly large task and I think did very well with it.
Banks across the country and state, including BankNewport, saw a significant increase in in-market deposits this year compared with the prior year, according to regulatory data. To what do you attribute this increase? I think the pandemic has caused consumers to spend less and to save more. They are anxious about the economy and some people find other investment options such as the stock market too volatile. The safety and security of banks – and for BankNewport in particular, we’re a 201-year-old [federally] insured bank – are a good option for people during these tumultuous times.
There’s also a lot of people making less money right now. Does that counteract this at all? I’m not sure if deposit growth is permanent dollars. I think people still have some stimulus funds, some unemployment funds they’ve stockpiled, and everybody looked at this early on and thought they didn’t know how long it will hold out. I’m sure some of the funds people have on deposit now will be used to cover basic living expenses.
When will you know whether this will be a long-term trend or a short-term jump? I wish I had a crystal ball to answer that. It would make budgeting a lot easier.
Acknowledging how much of this is still so uncertain, what’s your plan for recovery once the coronavirus crisis has passed? The impact from the pandemic is going to be felt for a long time, even [now that] we have a vaccine. Interest rates are low, so it certainly creates a good environment for lending. So, different industries will continue to grow. BankNewport has been in the lending business throughout this crisis and every other crisis we’ve had in our 200-year history. It’s really about business creation and business growth to create revenue streams for consumers, produce higher taxes, employment and wage growth … those will really help get us out of this crisis that much quicker.
What are the challenges getting to that recovery? The banking industry will have a difficult year in 2021. We are still all working with our commercial customers to really understand the depth of the harm that has been caused by COVID. We will be working closely with our customers to help them get through this.
It’s easy to say business is returning to normal, but we don’t know how many businesses are going to be able to hold on however long this lasts. Uncertainty is the biggest challenge.
How has the increasing reliance and popularity of online and digital banking platforms (both prior to and since the onset of COVID-19) impacted long-term strategy and areas of investment for community banks? For us, branching remains a key part of our strategy. There is a need to balance technology with the ability to have an in-person experience in a branch when that is needed. We’ll continue to make an investment to modernize branches in a thoughtful manner, much as we did to our flagship Washington Square branch in Newport. And even though we’re seeing a trend of transactions moving toward digital channels, in-person experiences in a branch are shifting to a deeper conversation within the branch, should it be lending, financial planning and the like.
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Sandra J. Pattie / PBN PHOTO/KATE WHITNEY LUCEY[/caption]
Is what you’re doing similar across the industry? I think everybody’s strategic plan is a little different. We all have our strengths that differentiate ourselves from one another. We at BankNewport believe in high touch, as well as having good technology. Part of that high touch is having one-on-one conversations and deepening our relationships with our customers. We don’t look at it as transactions. Community banking really does believe in personal relationships.
BankNewport also launched real-time payments in June. How does that compare with industry trends and offerings? Are they necessary for banks to remain competitive? Absolutely. In banking, just like everything else we do as consumers, we want instantaneous response, so it’s nice when you conduct a transaction to see it immediately concluded. We are one of the few community banks in the country dealing with real-time payments, so I don’t know what other banks’ strategic plans are.
In addition to its traditional bank services, BankNewport also has separate divisions for marine lending, wealth management and insurance. Does having a more diverse revenue stream allow banks generally to be more resilient during economic crises? The revenues and fee income the bank realizes from these non-lending or non-interest business lines does allow the bank to be more resilient in times of economic or social crisis. COVID is not only economic but also changing the way people socialize and spend. The strategic objective behind all of these business lines is to diversify our revenue streams beyond interest and income. Loan volumes and interest rates are subject to the ups and downs of the economy while these other revenue streams really help mitigate some of that risk.
Is this going to become a more popular/prevalent strategy across banks and financial institutions? It will be at BankNewport.
Financial services continue to be a male-dominated industry. Have you personally encountered gender discrimination or obstacles because of your gender? I have never personally experienced any discrimination. Rhode Island, and New England in general, have always been very friendly to women in banking roles, from managers to loan officers and CEOs. While I may be the first female CEO at BankNewport, our board has had female representation for at least the last 50 years, so I think we have been a little ahead of the trend in welcoming everybody equally.
Within our own team, I have five executives, two women and three men, and for most of my senior management, it’s a pretty equal split.
Why do you think it is important to have women in leadership positions in this industry? I think women bring a different element to the conversation. It’s always important to have diverse representation on all management teams. All managers have similar leadership traits, but I do think women are a bit more creative and open-minded, so our leadership style flexes to match the situation more. It’s exciting and about time women are continuing to move into a visible role in all industries. For example, it’s just great to see the Miami Marlins have named a woman as the general manager.
Speaking of diversity and representation, the Black Lives Matter movement has brought new attention to discrimination that people of color face by banks. How has BankNewport worked to address practices that might be unintentionally discriminatory against people of color? We have never had any discriminatory practices. I think we’ve been fair from the beginning of our organization. Our workforce, customers and community are made up of diverse groups and our employees are as well. We believe our policies are equitable and we try to address any barriers an underrepresented group may encounter, internally through hiring or professional development, as well as meeting customer needs. We pride ourselves on being a bank that is welcoming and inviting, and our community outreach is based on true partnerships with the organizations we serve.
Does the industry as a whole, though, need to reexamine structures that are inherently discriminatory or put people of color at a disadvantage, whether it be through qualifying for a business loan or the interest rate on your mortgage? Truly, I can’t speak on behalf of the industry. I can only speak on what I know intimately well, and that is what we do at BankNewport.
Some banks have also started donations and funding streams dedicated to minority businesses or consumers, as well as enhanced racial awareness training for employees. Has BankNewport done or considered that? Do you support these efforts? We have not this year because overall, the way we supported organizations with grants and sponsorships and board representation has always been equally spread among all organizations.
Generally, do I think it’s good that this has been raised as an issue? Absolutely. I think diversity should be a situation addressed fairly at all organizations and that all groups have a voice.