How Community Banks Survived the COVID Pandemic

By Julie Knudson

With the economy climbing out of the hole caused by the COVID-19 pandemic and the policy response to it—and families, businesses and banks all continuing to manage through the fallout—how have community bankers dealt with the series of unprecedented changes they faced?

ABA recently asked CEOs and presidents at banks with $10 billion and less in assets to share with us the strategies they used at the height of the pandemic and where they see the potential for long-lasting changes in how banks and customers work together.

Effects of COVID-19 on banks

As bankers assess their organization’s overall financial performance related to the pandemic, the survey uncovered nearly identical rankings for those institutions that experienced negative, neutral and positive impacts. Bank operations and customer engagement both encountered obstacles, of course, only a portion of which were likely under banks’ control. But even as lobbies closed and branches scaled back hours, banks continued to serve their customers and their communities. These efforts to maintain access to banking services and to support the neighborhoods and cities they call home resulted in 69 percent of respondents saying the pandemic had a positive or significantly positive effect on community engagement and the perception of their bank.

One area of concern mentioned early in the pandemic was cybersecurity, as consumers quickly became inundated with fake emails related to COVID-19 testing, states grappled with massive spikes in unemployment fraud and consumers and businesses alike migrated nearly all activities to digital channels. But despite a concerted effort by scammers and hackers to use the crisis for phishing, ransomware and other cyberattacks, only 25 percent of survey respondents said COVID-19 had a negative or a significantly negative effect on their banks’ fraud detection levels. The majority (70 percent) reported neutral impacts. In fact, the absence of increased fraudulent activity happened even while 43 percent of banks experienced an increase in the number of accounts, perhaps driven by a desire to avoid in-branch transaction and to take advantage of electronic deposits for stimulus funds and unemployment income.

Changes at the branch level were widespread

Banks took a number of quick actions in response to COVID-19. Limiting in-branch traffic to appointments only (77 percent) and transitioning employees to remote work arrangements (73 percent) were the most prevalent strategies. At Bank of Utah, lobbies were closed but Douglas L. DeFries, president and CEO of the Ogden-based institution, says the doors were never entirely shut. “When people wanted to come in, they could, either through an appointment or we just watched the doors,” he says. “That was something here in Utah that was important.”

A significant segment (61 percent) of institutions adjusted branch hours and staffing levels to align with the pandemic’s effects on in-person traffic. Saleem Iqbal, president and CEO of New York City-based HAB Bank, and his team were keen to keep branch staff comfortable even as health guidance and concerns remained fluid. Along with weekly—and sometimes daily—group calls, new protocols were implemented to better control the working environment. “The branches were kept locked, only three or four customers could enter at a time, and we made sure everyone was wearing masks and social distancing,” Iqbal says.

Employee engagement took center stage

Supporting employees was a priority for many banks in 2020. Most institutions (80 percent) provided hardware such as laptops to enable employees to work remotely. As conditions deteriorated early in the pandemic, HAB Bank was among the institutions crafting a strategy to send workers home while still maintaining services and banking functions for customers. “We ordered laptops for every staff member and our IT team gets a lot of credit, because they made it all happen,” Iqbal says.

Banks took other measures, too. Additional sick and vacation time was made available in many cases (70 percent), and 64 percent of banks reported connecting employees with webinars on wellness and productivity. A little over a quarter said they provided access to virtual mental health care as another way to support staff. Financial assistance, childcare support, company-provided PPE and boosts in pay were also among the tools banks used to help employees through unexpected difficulties.

The leadership team at CBL State Savings Bank in Greer, South Carolina, took advantage of the limited in-branch traffic to engage employees. Beach themes with loud music—considered too disruptive to the branch environment under normal circumstances—helped keep morale high. “We also left surprise gifts on their desks and we provided lunch almost every day,” says Jennifer T. Jones, president and CEO. The bank doesn’t typically encourage staff to eat at their desks or to blare music for all to hear, but 2020 was anything but typical. The institution also embraced the opportunity to don casual attire and keep things comfortable for employees who continued to work hard to support customers despite health and family concerns of their own.

Supporting customers in a time of need

Technology was a central component in ensuring customers could reach the financial services they needed. Video conferencing was widely used (39 percent), often to facilitate communications between team members but also to connect with consumers and even vendors. Institutions put additional horsepower into promoting the bank’s digital channels (21 percent) and increasing social media outreach (14 percent), too.

Real estate lending is the primary focus at CBL. Though Jones says the team endeavored to continue providing a human touch in their customer interactions, they quickly pivoted to digital signature technology. “We wanted to help expedite the transactions as much as we could, and digital delivery provided convenience and a healthier environment for everyone.” The contactless strategy helped customers tap into the bank’s services while minimizing the need to visit a branch.

Bank of Utah increased its use of digital channels during the pandemic, but the bank went one step further by boosting the size of its call center to address customers’ questions about the new technology tools. For people whose exposure to platforms such as online banking was limited, DeFries says, “it took a person to be able to explain it.” The additional call center support helped ease the transition without forcing customers to endure the frustration of wading through clunky voice menus or sitting on hold. “Everyone has had a bad experience going to call centers,” DeFries says. For those customers who weren’t eager to transition to digital channels, he adds, “it was important to have articulate and sympathetic people on the phone.”

Actions at the community level were key

A little over half (58 percent) of banks launched initiatives other than the Paycheck Protection Program to help their local communities. Many waived late and overdraft fees, allowed for liberal terms for repayment and deferment of loans and extensions, forbearance and loan restructuring. Others put their efforts into COVID-19-specific support, including distributing free masks and hand sanitizer, helping at vaccination sites, and offering financial and other contributions to foodbanks and charitable organizations.

Commercial real estate owners represent the bulk of the HAB Bank’s borrowers. The sector was hit hard by the closure of retail and hospitality businesses, as well as the number of firms that sent workers home and then began scaling back their real estate footprints to trim costs. “Many of our customers’ clients and tenants were under lockdown due to government orders, so they had no revenue to pay their rent,” Iqbal says. As a result, a sizable segment of the bank’s customers had trouble making their monthly payments. The HAB Bank team developed a strategy to support customers and by about April of 2020, Iqbal says, “Almost a fifth of our portfolio, our entire loan book, was accommodated for deferral.”

To further help businesses impacted by the shutdown, HAB Bank provided webinars for customers. “We arranged counseling sessions with financial experts,” Iqbal says. Business owners were able to learn more about navigating the financial fallout of the pandemic along with issues they needed to monitor, such as rising insurance costs and other pressing matters. “It was very reassuring for them and they appreciated it,” Iqbal says.

Purchasing employee lunches from local restaurants was just one element in CBL’s community support strategy. The bank also has a foundation and gave away close to $75,000 in grants. “We do that every year, but this year all grant recipients were local organizations impacted by the pandemic or those helping others who were impacted by the pandemic,” Jones says. In addition, very few customers contacted the bank to report difficulty with their finances, but Jones says that everyone who asked for help received it. “We agreed to defer loan payments and waive fees for all the customers who came to us.”

Bank of Utah’s Chow Down Challenge brought benefits for businesses and customers alike. After identifying restaurants affected by the pandemic, the bank started advertising for them on social media. “If people posted that they had used them for drive-through or pick up on social media, we gave them $10 and we gave the restaurant $10, too,” DeFries says. For the 50 or so restaurants, it meant people could support the community directly and it gave the bank a way to bring together hungry customers and the businesses that wanted to serve them.

Are some changes here to stay?

Increased use of technology and virtual tools (video conferencing chief among them) was overwhelmingly popular during COVID-19, with many survey respondents expecting that some version of remote and/or hybrid work would persist beyond the pandemic. Technologies that enable contactless support for customers, such as digital document signing and online account opening, were also on the list. Some respondents believe branches will operate under reduced hours due to ongoing decreases in foot traffic. The application of increased limits on debit cards was also noted. Some banks intend to further digitize their processes, relying less on paper and in-person access and more on virtual solutions.

Jones anticipates CBL will maintain its normal operations and hours once COVID-19 is firmly in the rearview mirror, but WFH for some employees will likely stick around. “We were getting very tight on office space and we were looking at different options for expanding our operational building,” she says. But when the team discovered that back-office roles can remain efficient in a remote environment, with the potential to rotate people in and out of the office to support in-person functions as needed, they also realized they could avoid the increased cost of adding office space. “Now we’re able to utilize a remote schedule and rotate people in and out of the office—and some are strictly remote—which prevents us from having additional expense,” Jones says.

The business customers at HAB Bank send a lot of wires, traditionally an in-branch function. “We signed them up on our electronic wire product so they can be anywhere, they don’t have to come to the bank,” Iqbal says. In addition, closing loans became onerous due to the number of people involved—customers, attorneys, title insurance company representatives and others all needed to be present to complete the in-person process. “We did some process engineering so they could do the closing without coming to the bank.” But as convenient as many of the newly launched virtual services are, Iqbal is quick to caution that the technology needs to be in place to support banks’ efforts to continue the migration toward digital tools as the effects of the pandemic linger and consumers’ preferences continue to evolve.


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