COVID-19 Impact on the Credit Union

Dec 10, 2020, 22:47 PM
Metro Building

Nearly every business was affected by COVID-19 and most were impacted negatively. As we close out 2020, with news of COVID vaccines soon to arrive, we sat down with CU President Mike McDermott to ask some questions about how Metro was specifically impacted by the pandemic.

Question: First things first, how did Metro fare in 2020 during a pandemic?

McDermott: From a financial performance standpoint, Metro was definitely impacted, but in the end we weathered the storm pretty well. We were hit pretty hard by the drop in interest rates and lost revenue when consumers were not spending money, and we had a lot of new costs directly associated with the pandemic. However, we also saw big increases in new members, new loans and new deposits, and past-due loans are running about one-half of their normal level, so there were positives too. Despite everything that happened in 2020, the Credit Union is very strong and very healthy.

Question: You said that loan delinquencies are half of a normal year, but unemployment in Nebraska is three or four times the level it was before the pandemic. What is causing that?

McDermott: We thought delinquencies would go up during the year too, but it just didn’t happen, I think for three reasons. First, when the government shut businesses down in the Spring to “flatten the curve”, we offered members the opportunity to defer three months of payments on existing consumer loans. Almost 5,000 members took advantage of this. Second, the government provided substantial unemployment benefits to those who were not working. And third, it was harder to spend money in 2020 because businesses were closed or people didn’t want to travel. In a lot of cases, members saved their money.

Question: How were Credit Union operations affected in 2020?

McDermott: As a financial institution, we have an obligation to be available to our members because people need the services we provide to live their lives. So as a manager, minimizing the impact of the pandemic was the most difficult and frustrating part of the last nine months. Fortunately, we took COVID seriously in the beginning so we had the necessary equipment for 40% of our staff to work from home, and this allowed us to better social distance for those who needed to be in the office. Obviously, government mandates required lobby closings for a period of time, but even after those were rolled back we had COVID-related staff shortages that required us to extend the closing of two lobbies, and ultimately we had to close lobbies for three days during the week at most offices. However, a couple of things happened during all of this that were really gratifying. First, many of our employees really stepped up. They picked up the slack when we were short, and really did a great job serving members. Second, I could not have asked for a more understanding response from our members. Whether it was driving to another office because of a closure or waiting the extra time on hold on the phone because of higher call volumes, most of our members worked with us and had an “all in this together” attitude.

Question: You mentioned higher call volumes. What changes in behavior did you see due to the pandemic?

McDermott: If you would have told me the type of behavior changes we saw in 2020 were possible in one year, I would have called you crazy. In the Spring, we saw a 40% increase in home and mobile banking activity, and a 30% increase in call volume. Metro members are “active”; they don’t just join the Credit Union, they use the Credit Union’s products and services. When people couldn’t get out, they banked electronically and by phone. People were saving more and spending less, although we did see some consumer spending return in the second half of the year. Clearly, consumers were looking for value. Our cars loan balances grew by over 20% this year due to refinancing at Metro for a better rate. We also had similar growth in Home Equity Lines of Credit because, being at home, people started some home improvement projects. Even after lobbies were open, we saw a greater number of people use the drive-thru which wasn’t surprising. We also had a 300% increase in members using Remote Deposit Capture where our mobile app is used to deposit pictures of checks instead of members' having to come in. We think a lot of these changes will be permanent. Now that so many more people have discovered how easy it is to bank electronically, we believe they’ll continue to do so.

Question: What impact does a permanent change in behavior have on Metro going forward?

McDermott: That’s really the big question. What does banking look like five and ten years from now? The world was already changing before the pandemic, and COVID probably accelerated some things. For example, before COVID we recognized the need to be convenient for people the way they want to bank, and for a growing number of people, that’s electronically. So, late in 2019 we purchased a new state-of-the-art online system for new accounts and loans, and we’ll be rolling it out in 2021.

This new system will make it really easy for members to open and fund new accounts from home, or apply for loans, get approved, and close the loan without ever needing to speak to an employee. People will be able to join Metro, or open or refinance a loan, from wherever they want at whatever time they want. We also think the way bank branches look will change. Branches of the future will have smaller lobbies with fewer windows, and we also see more automation in branches with more video interaction. In 2021 we’re planning to open an office in Elkhorn that will include more virtual interaction.

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