Episode 17: In this episode I interview Jason Hawkins, First United Bank’s CEO and President. We discuss a regional view of the economic crisis related to the COVID-19 lock down and its impact on small businesses throughout Kentucky.
Jason and I are very good friends. We went to college together at Murray State University and are brothers in the Sigma Chi fraternity. Jason has an undergraduate degree in Finance and an MBA. While in college, he worked at a community bank. He took a job in the trust department for Old National Bank, in Evansville, Indiana, after graduation. He worked in corporate trust doing bond issues and escrow arrangements. In 2005, he moved to First United Bank and Trust, based in Madisonville, Kentucky. He eventually became the CFO. In 2017, he assumed his current role as President/CEO.
Community Banks vs. Large National Banks
First United Bank focuses on what is best for the communities they serve. They currently have loans in more than 40 Kentucky counties. They are servicing about 1/3 of the state on a county by county basis.
Community banks don’t have to work through a lot of red tape. They want to bring local decision making to their markets. When clients come in, they are able to have a personal touch because they are not dealing with 800-numbers. Local, community banks don’t have to send their decisions off to a remote location. They don’t have to call committee meetings with people across the country to make a decision. They decide how to operate and then put that into action. First United Bank establishes strong connections and relationships with their clients. Jason and his team provide a high level of client communication to ensure they are servicing local needs.
The COVID-19 crisis came out of nowhere. The government’s decision to lock down businesses across Kentucky has been economically devastating. This is not meant to be a political statement. Rather, an observation that the environment changed overnight.
When the government funding came through, it became a challenge for the banking industry and remains a challenge. The Treasury’s guidance was delayed and confusing to both small business owners as well as lenders. The SBA’s infrastructure was overwhelmed. It’s been a huge learning curve for everyone. Typically, when the government institutes a program it takes 6-12 months to implement, and in this case, they had 2 weeks. Congressman Andy Barr said, “In the first 14 days of this program, there were more SBA loans made than in the last 14 years.”
In one of my previous podcasts, I interviewed Tommie Causey of the SBA, and Dave Oetken of the Louisville Small Business Development Center. Both of them were really proud of the work they did to assist small business owners. I also interviewed my CPA, Steve King on the Make the Numbers Work podcast. We talked about it from an accounting standpoint.
One of the biggest concerns was the US Treasury did not initially tell the banks how to treat this money and the specific requirements. The guidance has been slow to come out. It has been frustrating for small business owners. However, the US Treasury has created a list of FAQs to clarify many of the issues. Here’s a link to that information resource. Please make sure you’re reading the most recent version.
A Community Bank’s Response
As Jason explained, the banks took a first come first served basis. Speed of action wasn’t related to the size of the loan. They tried to deal with customers as they received applications.
In Episode 16, I explained that deal with a larger bank, but they had trouble because of the onslaught of PPP applications. I went across the street to a local community bank and within a matter of hours I had the loan approval numbers and with a matter of days directly thereafter, I had money sitting in my account. I was surprised how quickly a community bank moved this through the system. Whereas a large bank tends to get bogged down for a lot of different reasons.
One of the proactive steps Jason has implemented is to provide deferments on existing loan payments. This refers to loans outside of the Payroll Protection Program. This local decision typically allowed up to 90 days of payment deferral to help his banking clients. He required them to be current in order to get that, meaning they had to pay through their March payment in most cases to be able to qualify for deferral for the months of April, May, and June. This is another advantage of the local decision-making provided by community banks.
First United Bank is roughly a $330 million-dollar institution. He has processed about $25 million in PPP loans, comprised of more than 300 loans. While there have been some large loans, the majority have come from smaller loans.
Jason commented that if you talk to other community bankers, they’ll say that they had people work on weekends and nights trying to make sure that they could and get these applications in and get them approved.
Jason and Jim discussed the impact of the PPP loan activity. It has had a significant impact on capital requirement ratios.
PPP Loan Forgiveness
Based upon what Jason is seeing right now, he thinks forgiveness is probably going to run anywhere between the 70 and 90%. Solid documentation including payroll and 941s will be critical. The banks are cautious and trying to measure risk related to this process.
Your community banks want you to be successful. They want to make sure that you succeed, because that’s good for the community. Communication is key. If you are having a problem with your business, banks are much more favorable if you communicate and tell us here’s the issue that I’m having, here’s the struggle, here are the frustrations, and here’s what my cash flow looks like. They are much more willing to work with you than if you try to just say everything is fine. Ultimately, the banks want you to succeed because that helps them succeed.
If you would like to speak to Jason Hawkins regarding your situation, here’s his contact information:
Office: (270) 824-1633
Address: 162 N. Main St., PO box 1190, Madisonville, KY 42431
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