BANKS EASING payments during outbreak.

Banks across Arkansas are following federal recommendations and providing borrowers with options to defer loan payments during the coronavirus pandemic.

The initiative gives business owners and consumers squeezed by economic pressures brought on by the virus an option for economic relief over the next six months.

“All banks are working with both commercial and consumer customers to help them through this difficult time,” said Rob Robinson on behalf of the Arkansas Bankers Association, a trade group that represents banks in the state. “Loan modifications are one of the many tools we are utilizing to help our customers.”

Economic disruptions from the virus led regulators on Sunday to issue guidelines to the nation’s financial institutions, asking them to consider granting loan-payment relief for up to six months to borrowers suffering distress.

The collaborative effort includes the board of governors of the Federal Reserve System, the Conference of State Bank Supervisors, the Federal Deposit Insurance Corp. and the comptroller of the currency, among others.

Regulators “view prudent loan modification programs offered to financial institution customers affected by COVID-19 as positive and proactive actions that can manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk,” the agencies said in a joint statement.

Banks in Arkansas are being proactive, and retaining flexibility to respond to individual needs, in helping restructure loans. Customers “may be eligible for accommodations on mortgage loans and personal loans – things like auto loans and home equity loans,” said Jason Kincy, marketing director at Arvest Bank.

Simmons Bank is concentrating on granting immediate relief to get customers through the crisis, according to Steve Wade, chief credit officer of Simmons First National Corp.

“Our focus is generally on short-term payment relief, per the regulatory guidelines and our own initiative to help customers in need where circumstances warrant,” Wade said.

Bank OZK and Home BancShares Inc., owners of Centennial Bank, also have ramped up similar efforts to help customers.

“We are providing 90-day deferments and we will review the situation at that time to determine on a case-bycase basis whether another 90-day deferment is appropriate,” said Kevin Hester, chief loan officer at Centennial. “This process has worked very well for us in previous disasters, primarily caused by hurricanes.”

In a banking industry coverage note, Stephens Inc.’s research team praised the move by regulators. “This news is positive for the sector as it provides time for banks to manage what could be a temporary financial weakness at Covid-19 impacted borrowers,” the note said.

One critical aspect of the initiative is that regulators said they would loosen requirements for troubled debt restructurings, which banks generally refrain from doing because they require more internal oversight and accounting attention. In addition, such restructurings can increase an institution’s risk profile, which would attract the attention of regulators.

In this case, regulators are telling banks they have more freedom to restructure loans for customers going through financial problems related to the pandemic without fear of additional regulatory scrutiny.

State Bank Commissioner Candace Franks said banks should be relieved that they don’t have to be overly concerned with regulatory reviews in this process.

Relaxed restrictions “will provide more ease and latitude to institutions so that they can truly focus on working with their borrowers who are in need,” Franks said. “I feel certain that this supervisory statement will provide our banks with the knowledge and guidance to continue to work with their borrowers to sustain the economy and protect individuals and businesses.”

Robinson of the state bankers association said lenders are fielding requests from a broad range of industries – hospitality businesses, dental practices and restaurants lead the list. “Arkansas’ banks are prepared and are actively helping in communities all across Arkansas,” he said.

Arvest Bank announced that it is offering a new loan program to help customers who need emergency funds during the pandemic. Unsecured loans of up to $10,000 are available with a 60-month payback period. Customers also can get a payment deferral for the first 120 days.