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No end in sight for COVID restrictions at banks, credit unions

The omicron coronavirus variant could exacerbate inflationary pressures on customers while necessitating permanent shifts in the way banks and credit unions operate branches and staff corporate offices.

The new strain, identified last week in South Africa, was reported in more than a dozen countries in recent days. The U.S. confirmed its first case of the omicron variant Wednesday in California.

“We can’t just dream of a day when this is all behind us because that may never happen,” Laurie Stewart, president and CEO of Sound Community Bank in Seattle, said in an interview. Omicron “causes uncertainty and concern in our workforce, among our clients and in our communities, and that has ripple effects.”

The delta variant that spread over the summer had already prompted banks to make lasting changes to the way they assess credit, such as accounting for industries and geographies more susceptible to outbreaks, she said.

Omicron appeared on the global stage just as domestic virus cases were mounting anew. Reported cases climbed since late October from an average around 70,000 a day to more than 90,000 in late November, according to the U.S. Centers for Disease Control and Prevention.

The new variant amplifies expectations that the $928 million-asset Sound Community and other banks will lock in changes to the way they manage workforces.

Masks and plexiglass are here for the long haul. “We are now operating as if this is with us for as long as we can see,” said Laurie Stewart, president and CEO of Sound Community Bank in Seattle.

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Branches, Stewart said, may indefinitely feature plexiglass dividers between tellers and customers. They may also require masks, vaccinations or regular testing for employees.

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More significantly, banks’ back office and corporate staffers could forever operate almost entirely remotely. Banks proved during the pandemic that much of the work they do outside of branches can be done efficiently and safely with staffers working from home, Stewart said.

“We are now operating as if this is with us for as long as we can see,” she said. “So we err to remote work wherever possible, and we are cultivating our company culture around remote work.”

Nutmeg State Financial Credit Union in Rocky Hill, Connecticut, has had to pivot in many ways, said John Holt, president and CEO of the $513 million-asset institution. The pandemic forced “an evolution in how we do business and who we are,” he said.

Holt said most of the organization’s support functions are still remote, and while it has advocated for employees to have meetings in person and to be in the office for collaborative purposes, it offers flexibility with remote work. “We will continue to operate like this for the foreseeable future,” he said.

According to Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, because vaccination rates are higher now than at the start of the year, inoculation efforts could blunt the omicron variant’s impact. As such, most governments are not likely to order widespread lockdowns. President Biden said Monday that his administration would emphasize vaccinations over business restrictions.

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However, the U.S. and other countries started limiting travel from South Africa and cautioned that further restrictions could follow. Federal Reserve Chairman Jerome Powell, in remarks before the Senate Banking Committee on Tuesday, said omicron would increase worries among consumers and business owners, potentially resulting in steeper supply chain challenges that could intensify already lofty inflation.

Omicron poses “downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said.

The federal consumer-price index, a key measure of what Americans pay for goods and services, surged last month by 6.2% from a year earlier. It marked the quickest pace since 1990 and the fifth consecutive month of inflation above 5%.

Shan Hanes, president and CEO of the $132 million-asset Heartland Tri-State Bank in Elkhart, Kansas, said the omicron variant amplifies coronavirus-driven inflation concerns. For example, he said, fertilizer costs for his farm clients have quadrupled this year, making it difficult for them to produce profits on their crops. Those farmers support rural communities in the bank’s footprint, and if they struggle to break even in the year ahead, they could cut back on investments and impact small businesses and local economies more broadly, potentially affecting credit quality.

Inflation also has imposed “huge” upward pressure on wages, making employee retention a significant challenge, according to Hanes. He said the bank has already adjusted its budget for next year to pay employees more.

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Rural communities in the Midwest have little appetite for new lockdowns, Hanes said. But a recent spike in cases in Tri-State Bank’s southwest Kansas footprint, including two deaths, emphasized the seriousness of the ongoing pandemic.

“We have to have long-term plans in place for this — how to underwrite, how to staff our office in an outbreak, how to be prepared to deal with this indefinitely,” he said. “Those two deaths, they shook everybody back to how real this is, and the new variant comes on top of that.”

Steve Swofford, president and CEO of Alabama Credit Union in Tuscaloosa, echoed Hanes when he said that vaccines and increased natural immunity provide hope. But concerns linger for the $1.4 billion-asset organization.

“We would hope that the new variant doesn’t lead to business shutdowns and additional government stimulus that could result in employees choosing to stay at home versus working, exacerbating the already difficult labor market,” he said.


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