Credit Unions Filling Branch Gaps Left by Banks

Bank branch decline is a reality for most U.S. metro areas. However, credit unions appear to be filling some of those gaps left by banks, according to a study by DepositAccounts.com.

From 2008 to 2018, all except for seven of the 100 largest U.S. metro areas saw a reduction in the number of branches. The study noted on a branches-per-capita basis (calculated as the number of credit union branches per 100,000 residents), all metro areas underwent a bank branch decline. The inclination of banks decreasing branch networks is predictable since the analysis observed 71% of bank customers frequently bank online and 43% use mobile banking services.

As reported by Jacqueline DeMarco of MagnifyMoney.com (like DepositAccounts.com, it is a partner of Charlotte, N.C.-based LendingTree partner), the study compared the number of credit union branches operating in June 2019 to the number of branches operating five years earlier, and found credit unions expanded in half of the 100 largest U.S. metro areas.

However, not every major metro area experienced credit union branch expansion. Forty-five metro areas saw shrinking credit union branch numbers from 2014 to 2019, with Ohio and Pennsylvania hit especially hard by losses.

Kali McFadden, research manager for MagnifyMoney, found:

• Credit unions expanded in 50 of the 100 largest U.S. metro areas; there were no changes in five metro areas and branches decreased in 45 metro areas.
• Accounting for population growth, credit unions increased footprints on a per capita basis in 32 metro areas.
• The number of credit union branches in Fort Myers, Fla., jumped an astounding 59% between 2014 and 2019, and grew 39% on a per capita basis.
• Daytona Beach, Fla., and Charleston, S.C., saw the second and third largest branch growth rates, respectively, at 28% each. That represents growth in branches per capita of 17% and 16%, respectively.
• Augusta, Ga., saw nearly one in four credit union branches close in the last five years, representing a 27% loss in branches per 100,000 residents.
• Scranton, Pa., and McAllen, Texas, lost 20% of branches over the last five years, a 19% and 24% loss in branches per capita, respectively.
• The nine largest metro areas lost branches.

Four Florida metro areas found spots on the top 10 list of credit union branch expansions. Tennessee and South Carolina metro areas also made the top 10, meaning 60% of the top 10 metro areas for credit union branch growth were in the south.

The trend of growing credit unions does not extend everywhere. Locations like Augusta, Ga., Scranton, Pa., and McAllen, Texas. Pennsylvania and Ohio suffered more branch loss in recent years than other areas, as have some of America’s largest cities, including New York City and Los Angeles.

“In the past, most credit unions expanded by acquiring other credit unions. But in recent years, it has become increasingly common for credit unions to buy community banks. Acquiring banks helps credit unions expand, but purchasing small banks may be the key to their success,” DeMarco wrote.

She added, “Similar to credit unions, small community banks often have more personal relationships with their customers than large banks. These shared values would, in theory, help acquisitions between credit unions and small banks go more smoothly.”

The report revealed credit unions filled the void left by the loss of bank branches. Daytona Beach and Melbourne, Fla., found a spot in the top 10 metro areas that lost bank branches from 2008 to 2018. In 2019, both locations fell within the top 10 locations where credit unions are building branches.

The report also studied the impact of mergers on the unbanked and underbanked. “Bank mergers are notorious for leaving communities underbanked,” the report observed. “Large banks generally have higher fees and higher minimum required balances for deposit accounts compared to small banks. When there is a bank consolidation, it often becomes more expensive for low-income households to maintain bank accounts.”

The report pointed out while credit unions also merge, they do not close branches the way merging banks do because credit unions purchase other credit unions that have geographic reach missing from their acquirer’s base.

For many, banking with large bank chains might not be the best or preferred option, according to the MagnifyMoney.com report. The “2017 FDIC National Survey of Unbanked and Underbanked Households” found some of the main reasons people do not have bank accounts include: not enough money to keep in an account (52.7%), do not trust banks (30.2%), avoiding banks provides more privacy (8.2%), account fees too high (24.7%) and account fees unpredictable (20.2%).

“Credit unions may be a more desirable banking option for many people, as they often address some of these top complaints,” the report suggested. Credit unions generally offer higher interest rates on their deposit accounts and more affordable loan products. Other credit union benefits may include a stronger sense of commitment to the community and a willingness to work with those with poor credit histories.

For the survey, analysts mapped branch addresses reported by state and federally chartered credit unions in June 2019 call reports to addresses reported in June 2014 call reports and then compared the changes in the total number of credit union branches in the 100 largest metropolitan areas in the United States.