How Community Banks and Credit Unions Are Succeeding Through Struggle

Effective strategies focus on relationship-banking and meeting consumer needs

While operating in our new COVID normal is providing numerous challenges for banks and credit unions, there are hopeful signs for financial services. Even in this daunting environment, community banks are reporting modest growth of $202.5 million or 3.2% year-over-year in the second quarter. Credit union earnings are showing some positive movement as well with slight improvement from March, with second-quarter return on average assets of 0.61% compared with the first quarter’s 0.53% rate. These numbers validate how community banking and credit union pandemic strategies are paying off with solid performance.

With an impending credit crisis waiting in the wings, finding what works to stave off widespread industry contraction, and identifying new opportunities will help provide vital stability in the financial services sector throughout the COVID crisis. One common thread between community banks and credit unions is the focus on investing in relationships by meeting customer and member need, particularly through lending. For example, ICBA reports that SBA data shows community banks served 57.5% of all PPP recipients. Credit unions are also realizing a bump with commercial lending at credit unions up 17.4% or $13.1 billion.

According to Accenture, the financial services sector is better positioned to weather the COVID storm because they have “significantly more capital at their disposal than they did at the time of the 2008/9 crisis.” Further, since this is a crisis not centered in the financial industry, banking can help provide the way through and out via relationship banking that focuses squarely on meeting consumer needs at this moment. On success strategies for banking, Accenture says, “The most effective…will anticipate the crisis and address it holistically, thinking beyond funding debt and innovating for a post-COVID-19 recovery.”