How to Spot the Next Big Builder

The idea that the virtual branch was going to replace the brick and mortar seems to have dwindled. While credit unions have to offer sophisticated online services to compete with other self-serve member services, many members still like the comfort of doing face-to-face business (and credit unions appreciate the in-person relations for cross-selling). As a result, credit unions continue to grow their physical networks.

 
 

The idea that the virtual branch was going to replace the brick and mortar seems to have dwindled. While credit unions have to offer sophisticated online services to compete with other self-serve member services, many members still like the comfort of doing face-to-face business (and credit unions appreciate the in-person relations for cross-selling). As a result, credit unions continue to grow their physical networks.

A credit union that builds opens up a lot of opportunities for many service providers. Obviously build and design firms can gather business, but other operational services will be required for the development as well. New ATMs will be needed, cash automation systems may be employed, and systems all around will need upgrading. Trying to pinpoint who may be building in the near future is a good way to target new business.

While it's difficult to tell for certain who will be building in the coming months, you can look at some basic balance sheet information to look for characteristics indicating expansion may be on the horizon. The four credit unions below all had a large increase in land and building assets in 2002, generally indicating branch expansion.

Four Credit Unions who Increased Land and Building Dollars Significantly in 2002

Credit Union
Land & Bldg 12/02
Land & Bldg 12/01
12-Month Increase
Assets
American Airlines
$18,836,082
$1,711,330
$17,124,752
$3,882,663,512
Advancial
$14,339,754
$131,858
$14,207,896
$565,428,569
STAR One
$7,750,553
$305,723
$7,444,830
$2,413,428,532
Telcom
$6,748,603
$799,179
$5,949,424
$375,283,762

While it is nice to know that they just had an increase in land and building, it would be more beneficial if we could foresee who will be having an increase this year. If we review those same four credit unions' financial information from year-end 2001, right before they added land and building assets, we can see their data hinted that building may be in the future.

What in Their Year-End 2001 Profile Foreshadowed This Increase?

Credit Union
12-Month
Employee Growth
12-Month
Member Growth
12-Month
Share Growth
Land & Bldg per Employee
Employees
Assets
Advancial
19.87%
5.04%
15.28%
$1,410
94
$459,224,525
STAR One
14.49%
5.36%
16.63%
$2,580
119
$2,218,674,354
American Airlines
9.13%
6.53%
30.09%
$4,338
395
$3,395,974,532
Telcom
6.49%
3.08%
23.06%
$9,746
82
$320,575,094
CU Average
5.64%
3.34%
16.10%
$37,223
20
$51,379,245

I began by reviewing those credit unions' growth rates in employees, members and shares. If they were growing fast enough, their capacity to house all of those employees, members and deposits would become questionable. That capacity was becoming an issue was most prevalent when I reviewed land and building dollars per employee. Even though the industry average is almost $40,000 per employee, these credit unions all had less than $10,000.

Now, I was able to look forward and try to determine which credit unions may be building in 2003.

Who Might be Building in 2003?

Credit Union
Land & Bldg per Employee
12-Month Employee Growth
12-Month Member Growth
12-Month Share Growth
Employees
Assets
Municipal Empl
$2,193
9.62%
4.75%
15.45%
171
$691,058,684
University & State Empl of San Diego
$3,094
13.96%
29.17%
15.84%
176
$632,439,263
Christian Community
$8,341
19.23%
3.23%
12.24%
93
$306,059,708
Sunmark
$10,619
14.14%
10.50%
20.13%
113
$283,657,289

The four credit unions above all have very low land and building per employee ratio, and are growing rapidly. Needless to say, they soon will be splitting at the seams, and will need to expand.

 

 

 

May 12, 2003


Comments

 
 
 
  • very nice!
    Anonymous
     
     
     
  • We're a design/build firm (and have worked with Callahans in the past) so I'm very interested in the article and methodology of forecasting the "next builder." On wrinkle may be the CU's field of membership and/or service delivery philosophy. We've run into sum instances where the CU is seemingly over capacity but they're limiting the fixed asset investment to gain efficiency and subsidize a preferable pricing strategy for their members.
    Anonymous
     
     
     
  • We are a design/build firm & enjoy your articles always but this one is very informative and usefull in our continuing search for new clients. Thank You Bill Baker
    Anonymous