How community banks can ease financial anxiety


Unknowns create anxiety, and the COVID-19 pandemic has brought uncertainty like few other times in modern memory. Luckily, customers who feel anxious about money have community banks to lean on.

By Kelly Pike


Uncertainty is a part of life, but the COVID-19 pandemic has taken that maxim and turned it up to 11. A reality that seemed reliable just months ago—including a strong economy, steady employment and regular child care—has evaporated, leaving many Americans feeling overwhelmed and anxious.

This is especially true when it comes to their finances. Financial anxiety, or the stress or worry consumers have about money, is at levels not seen since the Great Recession. Nearly 60% of U.S. adults say they have experienced a loss of income as a result of COVID-19, according to a survey released by First National Bank of Omaha in April, and 45% report they are having trouble paying bills. Another 52% report they do not have enough savings to cover three months without an income.

Even those who haven’t experienced income loss are worried, says John Thompson, chief program officer for the Financial Health Network, a nonprofit research organization in Chicago with a mission to improve financial health for all. Recent data shows a substantial increase in financial anxiety, even though just a third of respondents had actually experienced an interruption in income.

“That anxiety comes from the unknown, the interconnection of the financial crisis and the health crisis and the inability to predict how it will affect your job, family, the small business you run or even the supply chains you access,” Thompson says. “We’ve known for a long time that there’s a strong connection between the stress you feel about money and how it translates into physical health and state of mind.”

Understanding financial anxiety

Carver State Bank, a $46 million-asset Black-owned community bank in Savannah, Ga., serves a low- to moderate-income community often defined as the working poor. This group is far more likely to be underbanked or unbanked than white households, says Robert E. James II, president of Carver Development CDE and Carver State Bank’s director of strategic initiatives. Many in minimum-wage jobs related to tourism have been laid off, while essential workers in grocery stores and those who make deliveries worry about the risk of getting sick and losing income.

“There is tremendous money anxiety,” James says. “We’re hearing that people are concerned about their future ability to earn money at the individual level, and we’re hearing from people who are either heads of churches or other nonprofits or small businesses that they are concerned about the future viability of their organizations.

“There is this long-term anxiety where we don’t see what the end is going to be. When assistance runs out, they’re not sure how they’re going to make ends meet.”

Carver State, which is a community development financial institution (CDFI), has addressed that anxiety by providing up to four months’ deferment to all loan customers across the board. It’s also joined a national ATM network to give customers access to more fee-free ATMs.

“We’re really seeing it in the loan department, with loan customers who need our assistance in trying to work through different scenarios,” James says. “What will they do after the deferment period? How do they restructure their debt to make debt service more manageable?”

Financial concerns have evolved since the pandemic began. In the beginning, Citizens State Bank was confronted by customers who were concerned about the physical safety of handling currency, but their worries quickly shifted to personal financial worries, says Tim Cruciani, president and CEO of the $140 million-asset bank in Cadott, Wis.

The community bank has taken a proactive approach to identifying customers who are feeling overwhelmed. It’s called nearly half of its retail customers just to check in, trained its drive-thru staff to ask customers how they are doing and armed employees with answers to frequently asked questions to better guide conversations.

The stability on which community banks built relationships with customers on may be gone, necessitating a shift in the way bankers engage with customers, Thompson says. “We may have been thinking about financial planning and asking about goals: ‘What are you saving for and [what are your] long-term objectives?’” he adds. “We may need to start with a different frame: ‘How are you doing? What are your challenges and worries?’ We may need to help people figure out a slightly better system around day-to-day bill payment and spending choices.”

“We understand that we are dealing with something important … similar to a conversation with a doctor or pastor or priest, in that there is a lot of talking about something close to heart and mind.”
—Michael Troutman, Virginia Commonwealth Bank

As part of its VCB Cares campaign, Virginia Commonwealth Bank, a $1.24 billion-asset bank in Richmond, Va., has its bankers asking questions to uncover opportunities to help customers. The Cares Campaign covered a breath of topics from facing unemployment, what to do with an old 401(k), budgeting, talking to businesses about organizational documents, possible business transition planning, or need advice on how to save for retirement when freelancing. Many of these conversations were proactive telephone calls to the clients on the bank’s retail front, started via drive-thru speaker with teller handbacks that asked a simple question to start the conversation via speaker with bank staff who are cognizant of privacy concerns. They often invite customers to continue conversations over the phone or with a lobby appointment, says Michael Troutman, Virginia Commonwealth Bank’s executive vice president and chief revenue officer. The community bank also fast-tracked plans to offer online account opening.

“We understand that we are dealing with something important. Financial conversations are similar to a conversation with a doctor or pastor or priest, in that there is a lot of talking about something close to heart and mind,” Troutman says. “It’s an emotional conversation.”

Money anxiety: then and now

For many Americans, the last time financial anxiety was this high was during the Great Recession, but the feeling looks different than it did back then.

That crisis emerged when the housing bubble, propelled by subprime lending, burst. That’s a far cry from today, when new home purchases and refinancing are in high demand due to low interest rates.

“In 2008 and 2009, people were desperate, because they couldn’t afford their house,” says Tim Cruciani, president of Citizens State Bank in Cadott, Wis., which services $80 million in secondary market loans and is seeing surprisingly few request for deferrals. “When you pile on foreclosure after foreclosure after people are put into mortgages they couldn’t afford, it increases the supply of homes and devalues homes.“

Today’s anxiety centers on uncertainty, says John Thompson, chief program officer for the Financial Health Network, a Chicago nonprofit. The income volatility associated with job instability is overwhelming people as businesses and schools fluctuate in reopening.

Now, money anxiety takes the form of small business owners worrying about covering payroll and expenses while managing their businesses in an environment that is continually changing, says Kevin Langin, senior director of public relations and communications for First National Bank of Omaha in Omaha, Neb. For others, the focus may be on how to pay bills when they’re unemployed or if their work hours have been cut.

But it’s not all bad news. “A positive difference from the Great Recession is that, overall, people were carrying less debt and were better off financially at the start of the pandemic than they were 10 years ago,” Langin says.

Meanwhile, banks are in a better position to help. “Banks have more tools now,” Cruciani says of deferrals and other modifications made due to lost income. “When people can’t afford their homes because they were misled about their loans, it’s a very difficult situation to manage.”

Easing small business money worries

The Paycheck Protection Program (PPP) has given community banks an opportunity to provide stability, business advice and peace of mind to thousands of small business customers.

Some of the small business customers at Virginia Commonwealth Bank weren’t in business during the Great Recession or previous financial downturns, so they didn’t know what to expect. Lenders at the community bank have used the PPP application process to have conversations about risk management strategies and what their clients’ business will look like going forward in terms of banking items like liquidity, access to lines of credit and risk management, but also their plans for recovery, protecting their wealth and helping their employees, Troutman says. “We took that very important step of having consultative conversations,” he adds. “Business owners are just as worried about their employees as their business surviving.”

Citizens State Bank helped ease small business customers through the PPP process by working with existing customers to dig deep into their needs. That included creating outlines to help track how PPP disbursements were spent.

“We worked very tightly and individually with each borrower so that we could almost guarantee that when the forgiveness part came,” Cruciani says, “they’d keep in the paradigm and stay in the confines of forgiveness.”

Half of those customers asked for the bank’s insights into their operations, talking through what it might look like if revenue drops 20%, 30% or 50%.

“They ask, ‘What do I do? What do the financials look like? What’s our best guess for recovery?’” Cruciani says. “We never tell them what to do, but we make suggestions about business lines and decisions.”

James found that many of Carver State Bank’s small business, sole proprietors and nonprofit customers, including churches, didn’t realize they were eligible for PPP and SBA disaster loan programs, making outreach and education essential.

A port in the storm

While it may not be possible for a community bank to create confidence in a world with so much uncertainty, Thompson says community banks can be a part of the solution through their roles as community leaders.

“Community bankers will be a part of how we rebuild, restore and reset the community,” he says. “They need to do that in a way that recognizes there are real structural problems around inequality. We, as financial institutions, must do all we can to educate about those issues and make sure we’re not reinforcing them.”

In Omaha, Neb., $23 billion-asset First National Bank of Omaha has tackled that challenge by awarding $880,000 in community development grants to 47 organizations across the seven states it serves to support programs related to affordable housing, neighborhood stability, entrepreneurship and small business development. The community bank has also awarded more than $3 million in community development grants and impact investments to 27 organizations that are providing relief to people and businesses affected by COVID-19. “These dollars focus on housing, workforce and small business stability programs,” says Kevin Langin, senior director of public relations and communications at the community bank.

“We’re in completely uncharted territory, but we’re all going through the same experience at [the] same time. We need to be empathetic to customers and our communities at large.”
—Robert E. James II, Carver State Bank

Carver State Bank has partnered with the City of Statesboro, Ga., located 90 minutes from Savannah in a county of persistent poverty, to create a loan fund for local small businesses suffering from the pandemic’s economic impact. The city had been looking for a bank partner and was willing to put up $250,000 in loan loss reserves but was having trouble finding a financial institution to partner with. Carver State Bank promised to make at least $1 million in loans. Licensed businesses in good standing with the city are able to take out loans for up to $25,000 without collateral.

“The biggest piece of advice I’d give is for us to try to put ourselves in shoes of customers and remind ourselves that they are feeling—we are all feeling—an enormous amount of anxiety, and it’s OK to feel that,” James says. “We’re in completely uncharted territory, but we’re all going through the same experience at [the] same time. We need to be empathetic to customers and our communities at large. We’ll all have to try to muddle our way through.”

4 ways to guide customers through the new normal

Community banks that want to help customers deal with money anxiety need to be ready to have conversations they may not have needed to have in the past. John Thompson, chief program officer for the Financial Health Network in Chicago, suggests community banks help customers in these four areas.

  1. Unemployment. Many families are navigating unemployment and state and federal employment programs for the first time. It can be a confusing and overwhelming process, but community banks can help guide people through it, from how to apply to what benefits they’re eligible for. If community banks don’t know these answers, they can find partners that do.
  2. Stability. Banks are used to providing products, but they should focus on providing stability. Help customers prioritize bill payment and offer access to appropriate forms of credit to bridge gaps.
  3. Saving. Though saving may feel like a luxury to many right now, community banks can help facilitate it with micro savings and automated approaches to putting away small amounts at a time. It may be just $2 or $3 a week, but it’s a good start for many families. Prize-linked saving, where, instead of interest, customers can have a chance to win larger amounts of money, such as $500 a month, has shown promising results.
  4. Planning when possible. If something feels relatively certain, such as another round of government stimulus, work with customers to ensure they get the money and that they have a plan to make those funds last.

Kelly Pike is a writer in Virginia.

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