Do Branches Lead to Higher Growth?

Credit unions are opening branches to attract new members and expand relationships across their membership. But do the investments achieve these objectives?

 
 
The credit union branch network continues to expand. Credit unions operated 20,287 branches as of year-end 2006, up from 19,920 one year earlier. On the industry’s balance sheet, assets in land and building topped $12.5 billion, up 10.1 percent from December 2005. Credit unions are opening branches to attract new members and expand relationships across their membership. But do the investments achieve these objectives?

Credit unions often look to achieve branch profitability within three years of opening. Call report data on the number of branches has been collected for three years now, presenting the opportunity to measure the success of an expanding branch network. To do this, we looked at the 99 credit unions with at least one billion in assets and 10 branches (State Farm Great Lakes is excluded due to the impact of last year’s merger).

With this peer group, we then used a scatter diagram to compare the 3-year average annual growth rate of their branch network to their 3-year average annual growth rates in members, loans and shares. The trend line will tell us if faster branch network expansion translates to higher growth in three key metrics. As shown in the graphs below, the resulting trend lines show a positive correlation in all three categories, indicating that the investments are paying off on average.

There are certainly factors other than branches involved in the growth results, and the types of branches opened (in-store, storefront, stand-alone) will vary by credit union. In addition, there are a number of credit unions that have achieved solid growth in all three categories without significant branch expansion. The reverse is also true, with some credit unions that have expanded their branch network falling below the peer average growth in all three categories. However, the overall trend is positive for those credit unions pursuing a branching strategy.


Execution is key to any branch strategy. Setting goals and tracking success is a key part of the process for many. To learn more about steps credit unions have taken to improve results at their branches, join us on June 13 th for the webinar “Optimizing Branch Productivity & Performance”.

 

 

 

May 21, 2007


Comments

 
 
 
  • Based on a question you had in yesterdays sales meeting I thought you would be interested in this. There is also a webinar opportunity included in the text. :)
    Janelle
     
     
     
  • How can you say that branch growth is positively correlated to loan growth? Looks like a zero correlation to me...
    John Nilles
     
     
     
  • Thank you this type of information is very helpful to us
    Bill Baker Baker Const. CO
     
     
     
  • Great analysis!
    Lili