Branch Population Holds Steady While Productivity Rises
Advances in staff and technology utilization are driving the ability to serve more members per location, and the numbers show it.
A data-driven look at credit union branching tells a tale of three trends: Fewer institutions, steady branch numbers and heightened productivity. While credit union numbers shrink nationwide, the total number of branches has historically not shrunk with them. Additionally, branches and the people who staff and support them are growing more productive as a result of technological and educational innovations.
The death of branch banking has been predicted for years. But what’s really shrunk the most dramatically has been the number of institutions. In mid-2008 there were 8,161 credit unions in the United States and they had 21,162 branches. By mid-2018, there were 5,596 credit unions with 21,064 branches.
In the past decade, as the economy went through the Great Recession and subsequent recovery, the number of credit unions shrunk 31.4% while the number of branches fell just 0.01%.
And in the past year, from Q2 2017 to Q2 2018, data at Callahan & Associates shows that the branch count grew by 66 to 21,064 while the number of credit unions fell 219 to 5,596.
In the past year, 409 credit unions increased the number of branches they operate. On the other hand, 225 credit unions have fewer branches in June 2018 than they did in June 2017. As the accompanying graph, “Number of CUs With Changing Branches by Asset Class,” shows, the trend of an increasing number of credit unions with more branches is outlined at every asset class.
The reduction in the number of credit unions, not reciprocated by that of branches, has accompanied an emerging capacity of those surviving institutions to scale their operations to a growing membership.
They’re doing that through advancing digital offerings and widespread adoption of the universal employee model, branch efficiency software and ITMs. The result has been productivity metrics that are hitting new record highs while the credit union employee base is expanding concurrently.
For instance, the number of full-time equivalent employees in the industry has grown every year since 2010, and now stands at 298,785 as of the second quarter of 2018. Growing 3.9% since last year at this point, employee growth outpaces branch growth as the number of employees per branch jumped from 13.7 to 14.2.
At the same time, annualized total revenue per employee is up 8.9% year-over-year to $240,729, an all-time high. Ten years ago, in June 2008, it was $221,748.
Loan originations per employee, another key performance indicator, saw similar trends to total revenue per employee. The 5,596 credit unions originated a record $1.7 million in annualized loans per full-time equivalent employee. That’s 52.9% more than the $1.1 million in loans per FTE for the industry in the second quarter of 2008.
Other metrics that saw significant increases from the second quarter of 2008 to the second of quarter 2018 and speak to this advancing productivity include accounts per employee, up from 865 to 974; accounts per branch, up from 9,827 to 13,816; assets per branch, up from $38.5 million to $68.7 million; and members per branch, up from 4,215 to 5,477.
That relative productivity per branch comes from branch numbers growing at a slower rate than members, loans and shares among other fundamental credit union metrics. This raises the question: Are branches still vital for credit unions to create value and service for new and existing members? And how long will they stay that way?
The answer is different for each credit union, but we can conclude that the number of branches does not appear to hinder, nor determine, the number of members a credit union can serve. How staff and technology are used and the innovation the institution is willing to implement seems to be more of a determinant in that regard.
Aman Johal is an Industry Analyst for Callahan & Associates. He can be reached at 800-446-7453 or ajohal@callahan.com.