TCF Financial Corp. approved more than 16,000 U.S. Small Business Administration Paycheck Protection Program loans for $2 billion, all while adapting to the COVID-19 pandemic as most non-branch employees transitioned to working from home.
During that time, the Detroit-based TCF Financial maintained progress on the integration of TCF Bank and Chemical Bank following the $3.6 billion merger with the former Chemical Financial Corp. on Aug. 1, 2019. After the integration, Chemical Bank offices will take on the TCF name.
MiBiz spoke recently with TCF President and CEO Craig Dahl and Executive Chairman Gary Torgow about the PPP, managing through the pandemic, and the pending integration.
The SBA put almost $350 billion into the field in a week for the PPP’s first round and worked with a lot of banks. What was the biggest challenge in getting it up and operating so quickly?
Torgow: The SBA and Treasury getting the system to work. The SBA never had this kind of volume. They were a much smaller producer, and the challenge for us was being able to get into their system, getting the guidance from them about what to do and what kind of application (to use). They went through two or three application processes before we got the right one from them. I think the biggest challenge was just getting into the SBA system and making sure that we were compliant with the documents. We had quite a number of iterations until they got to the final application. Once we got into the system, the SBA worked well with us. … I think it worked pretty seamlessly.
What surprised you about the PPP?
Dahl: This was intended to fund roughly two and a half months of payroll for small businesses. I support how fast the money went out because it had to. If these business owners weren’t certain about getting the money, there’s no way they could keep employees on the payroll. We had over 220,000 employees impacted by the loans that we made. Take that across the whole system, and that’s a big deal. There was nothing ever done this fast, but this was something that required it to be fast.
What has the huge demand for PPP loans told you?
Torgow: The COVID-19 pandemic struck the country economically in a way that without that really important government infusion, without bank cooperation, without everybody coming together, the economic damage would be worse than it is. What it told us is that the government smartly reacted quickly. They were also in very unchartered territory. We haven’t seen anything like this in a stimulus program.
Continuing stimulus opportunities are going to be very critical to keeping the economy, the businesses and the people afloat until this pandemic is over and we can see economic recovery.
What have you learned from the last two months?
Dahl: I don’t think everyone is aware of how little cash on hand these small businesses operate with. They’re spending tomorrow’s revenue today in some of these. So, that’s the big takeaway that people need to understand. They’re not going to operate with a cash cushion that’s going to allow them to withstand (the effects of a major revenue disruption).
The other thing I want to point out (is that it’s) different than the last recession where businesses could be criticized for making moves or whatever. Even at TCF, the first two months (of 2020), we had normal, good months. We were right on our plan. All of a sudden all of those plans went right out the window. These companies were in the same boat. They were not making mistakes leading up to this cash shortage. Their revenue went to zero overnight.
If Congress decides to do another PPP round or another form of stimulus, what advice do you have?
Torgow: What we want Congress to concentrate on is what we believe is the foundation of communities, which is the small businesses, the small mom-and-pop shops, the restaurants, the little apartment building with four or five residences. We want to make sure the underpinnings of the community are supported through this, and we don’t want to see businesses close. We want to see businesses strengthened. I think that if government is going to continue to aim, they should aim at those who suffer the most through the economic decline that we’re in. If I were talking to Congress, I would be talking about the urban centers, the inner cities, the places that were hit the hardest with the health crisis and the economic crisis. Those are people that need help the most.
How have the lessons from the last financial crisis affected decisions in this crisis?
Torgow: The lessons that we learned from the systemic debacle of ’08, ’09 and ’10 was that we, at least in our industry, recognized that banks do have to stay strong and healthy and very supportive as a community, and we have to work and act fast. We had to be concerned about the health of our employees. We had to make sure everybody was safe, and nobody got sick, and kept 85 percent of our branches open so that people could get to their accounts and could feel that the bank is responsive to them. Those were very important lessons. There was a very slow response in ’08 and ’09 and in many respects, it was the banks that were suffering the most during those times, which turned out to be the suffering of customers and communities.
How has the pandemic altered how you run the business?
Torgow: A couple of things will occur. One of those is really getting a sense of who can work from home, as opposed to working in the office, and where their comfort levels are. The second is we’ve recognized for the next period of time, customers are going to need continued support. We’re going to need to continue to do the business that we did before, which is approve loans so people can have their ability to grow the businesses that they want, and we want to make sure we’re there for them. It will make us look very deeply at the employee situation and the customer situation to make sure that we are responding very well.
What’s the status of the integration of Chemical Bank and TCF Bank after last year’s corporate merger?
Dahl: Despite all of the obstacles that have just propped up in the last 60 days, we are really proud of the response our team has made. Over 90 percent of our non-branch staff is working from home now and it’s gone extremely well. We remain on track for our integration, which is in the third quarter. We’re excited to bring forth the one system and the one solution to all of our customers. Everything’s still on track.
How do you see the pandemic permanently changing your industry?
Dahl: Some of the things have already happened. What’s the role of the branch going to be? How well do your digital tools work? And how does your customer base accept and adopt them? There were a lot of people that were critical of our branch system having all of these drive-ups, and yet that was the key for us to be able to service our customer base by having that drive-up function during a time when we kept over 80 percent of our branches open. We understand that change management is going to be very important on the other side of this as well.
Does the current situation accelerate the use of digital banking options?
Torgow: Every part of the digital experience is going to be advanced here. You see the way we’re conducting meetings, you see the way we’re communicating with each other. I think there’s going to be less travel. I think people are going to be utilizing the tools they have been given during the pandemic, and customers are going to be more adept. We’re going to be in a good place with this conversion in advancing our technological opportunities for customers, and more and more the customers are going to use it and appreciate it and feel more comfortable. They are going to drive themselves into those areas because of what’s happened.