Even as the number of credit unions shrinks, the number of credit union branches is going up, opposite the trend in bank branching, according to new analysis.
An SNL Financial study found the total number of credit union branches across the U.S. is on the rise for the second consecutive year after declines in the previous two years.
As of July 30, the firm said there were 27 more CU branches opened than closed in the U.S in 2015. In 2012 and 2013 combined the industry lost a net of 241 branches, the study by SNL analysts Ken McCarthy and Tahir Ali found.
Asked by Credit Union Journal to compare credit union branching trends to those of banks, Ali said banks across the U.S. continue to trim their branch networks following the credit crises.
"Banks and thrifts have closed more branches than they have opened every year since 2010," Ali said. "For the first two quarters of 2015, banks and thrifts saw net branch decline by more than 700 branches."
According to Ali, SNL's senior industry analyst for financial institutions, CU branches in total saw a decrease during 2012 and 2013, by 120 and 121 branches, respectively. "However, a recent change in trend is noted as credit union branches in total saw a net increase of 17 in 2014 and 27 in 2015 year to date, as of July 30, 2015."
Will Increase Continue?
Because the pattern change is so recent, Ali said it is "too early to speak" if this trend will continue, or increase.
"However, based on our conversations with industry observers, credit union members continue to value face-to-face interaction at a physical branch," Ali told Credit Union Journal. "Credit unions that are opening more branches are focused on member convenience, along with their goal of increasing physical market presence."
According to Ali, institutions that believe physical branches serve as a public face and provide an important marketing function "will continue to add to total credit union branch count."
Growth In Michigan, Minnesota
Minnesota has seen the most net openings so far this year with eight more branches opened than closed. On the flip side, Pennsylvania has 10 fewer branches now than it started with at the beginning of 2015. Texas, which has more credit unions than any state in the country with 1,632, has experienced a net gain of four branches in 2015.
The SNL study spotlighted $1.9 billion United Federal Credit Union, St. Joseph, Mich., as a CU that is adding branches. UFCU has a net gain of six branches thus far in 2015 after its branch count was flat last year.
Stacy Fillmore, VP of national sales and service for United Federal, told SNL the recent growth is being driven by membership requests. She indicated future growth will not be limited to stand-alone buildings. In 2015, United Federal added two in-store branches one in Nevada and one in Arkansas inside Walmart SuperCenters. The heavy customer traffic in those locations allows the CU a chance to add more members, Fillmore said.
Michigan is fifth in the country in terms of the number of total credit union branches with 1,026, according to SNL data. Fillmore said United Federal is always looking at what the competition is doing while at the same time surveying its members to gauge their wants and needs.
"We want to be competitive and convenient," she said. "Of course, we are always watching the industry and our competitors, but more than anything we depend on our own research."
Fillmore said United Federal has plans to expand its branch footprint further. She said the company has had three ground-breakings so far this year with more in the pipeline. She pointed specifically to Nevada, where the credit union has been focused on the Carson City and Reno markets. The CU also is looking for an expanded presence in Arkansas and North Carolina, and reviewing branch locations in its home state of Michigan to ensure its current sites provide customer convenience, she said
Ancin Cooley, principal with Synergy Bank Consulting, Inc., in Elgin, Ill., said banks tend to use branching as a part of a larger deposit growth strategy, whereas small credit unions use additional branches to grow their brand and establish better footing in the communities they serve. Credit unions tend to operate and thrive better in situations with diverse socio-economic conditions, he said.
As the cost of delivering mobile transaction solutions declines, both banks and credit unions will be able to offer the same technology solutions to their customers and/or members, Cooley said. He believes the FIs that are shedding branches because they think mobile is the wave of the future are missing the benefits of having a physical presence.
"I deal with Apple primarily through my phone for small stuff such as buying new music or paying for subscriptions. However, when I need something fixed or I need to make a big purchase I go to the store," Cooley said.
Cooley believes that Florida and other Southeastern states will continue to see more branches built purely due to demographics and the "snowbird effect." Florida saw net growth of 18 credit union branches in 2014 and six already this year, the SNL analysis found.
CDCUs Growing Branch Networks
Pablo DeFilippi, vice president of membership and business development for the National Federation of Community Development Credit Unions, told SNL as of year-end 2014, community development CUs reported having 914 branches, which represented a year-over-year net increase of 61.
DeFilippi said CDCUs tend to be much more "high touch" than their mainstream counterparts both credit unions and banks and as a result, maintaining or expanding their footprints is a big part of the business model.
"CDCUs are exploring innovative strategies to expand their presence in [low-to-moderate income] markets, such as partnering with community-based organizations to share space and provide access to their clients on site," he said. "Some are also working with local governments to embed their services in social services hubs."