Revenue may take a hit the longer credit unions limit branch access

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This story is part of Credit Union Journal's ongoing coronavirus coverage, as well as the special report on branching, which will appear throughout March.

The nation’s embrace of social distancing to fight the coronavirus has had an impact on credit union operations as branches across the country shut their doors to limit up-close interactions.

Credit unions in a majority of states have begun taking steps to curtail nonessential branch visits, restricting in-branch access to appointments only, limiting the number of members inside at any given time, or in some cases closing off access to members entirely and shifting traffic toward drive-thru lanes.

[Ed. Within hours of this story being published, many credit unions across the country began announcing plans to shutter branches to members entirely and route traffic exclusively to ATMs, ITMs and drive-thru lanes.]

While state and federal regulators normally require advance notice of branch closures or limited access, some have loosened those policies in light of COVID-19.

“We’re all trying to grapple with our new normal with this pandemic,” said Kelli Ellsworth-Etchison, chief marketing officer at Lansing, Mich.-based LAFCU, which elected last weekend to limit branch access to appointments only starting on March 16. “We know that as an employer and a public-facing financial institution our responsibility is to keep our employees, membership and community safe…We’re trying to figure out how we can best keep people safe and trying to employ the social distancing and what does that look like.”

LAFCU staffers who can work remotely have also been instructed to work from home.

“We’re not saying, ‘Let’s just limit public traffic,’ but, ‘Let’s also limit traffic to the organization from people who don’t need to be in the office,’” she added.

Staff are being redeployed to other departments as needed, including providing support for the back office, members using interactive teller machines and the contact center.

One factor leading to LAFCU’s decision was Michigan Gov. Gretchen Witmer’s move last week to close all K-12 schools for at least three weeks. Shortly after LAFCU and other area CUs began restricting access, the governor ordered restaurants, bars, movie theaters, gyms and more to close.

Keesler Federal Credit Union in Biloxi, Miss., where schools are closed until at least April 17, has taken similar measures, keeping branches open for now but using guards to restrict access to a maximum of 10 members at once.

The initial response from members was positive, said William Tischler, director of information security at the $3 billion-asset credit union.

“Everyone’s been really worried about it, so we just politely inform them that for their safety we’re instituting social distancing protocols,” he said. “Everyone tends to keep their own distance anyway because they’re worried about it.”

The worst is yet to come?

While credit unions are likely to continue putting the emphasis on the health and safety of members and staff, there is the possibility that restricting branch access could cut into profitability.

“I’m not sure we’ll know the answer to that until this is over with,” said John Murnane, a CPA and shareholder at Doeren Mayhew.

Murnane said interest rate reductions from the Federal Reserve are leading to boosts in the refinance business at many credit unions he has spoken to but suggested prolonged social distancing could ultimately hurt CUs and other financial institutions.

“I think the government sees the financial services industry as an essential business, so I think there will still be access to money … [T]he last thing the government wants is to tell people, ‘Hey, you can’t have your money,’” he said. “It’ll probably happen where [restricted branch access] starts to have some negative impact on the industry, but it may take a lot longer than [a few months].”

The bigger impact, he said, is that the longer social distancing goes on, the more likely it is that job losses will increase, leading to a potential negative impact on the bottom line as delinquencies and late payments mount. He advised CUs to ensure their loan loss accounts are robust now before things get worse.

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Keesler FCU’s Tischler said one element that’s been underplayed is that pandemics can last as long as 18 months and often come in cycles. That could have a ripple effect on credit unions.

“People are going to start recovering and the number of new cases will dwindle, and there is a high probability of a second wave coming through and then hitting again, so part of our planning process so to work that sustainment piece of recovering [and] people coming back but then being prepared to go back into that outbreak mode of remote work and limited services.”

Following a presidential press conference that emphasized avoiding crowds of 10 people or more, Phoenix-based Arizona FCU moved to restrict access at its 12 branches to appointments and drive-thrus only.

“The intent behind that is, ‘Let’s not have huddled groups of people together,’” said Jason Paprocki, chief operating officer.

While some of the credit union’s branches don’t often have more than 10 or 20 members inside at any given time, its East and West Valley branches at their peak can see upwards of 35 guests at once. The decision to restrict access across the entire branch network was made in part to keep lower-traffic branches from being overwhelmed if some locations became too busy.

But management is also encouraging branch staff to use their own judgment.

“This isn’t a corporate mandate,” he explained. “We’re going to have people show up. You’re empowered as branch managers. You understand [how to do crowd control].”

This story was updated at 5:17 P.M. on March 20, 2020.

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