Productivity Improves Along With Growth In Workforce

While expense management is still a central focus for credit unions going into 2013, many are hiring employees and looking to increase productivity to drive new revenue.

 
 

With historically low interest rates holding down interest income and margins tightening, expense management is still a central focus for credit unions going into 2013. But instead of simply raising fees and cutting operating expenses, both of which could be detrimental to members and employees, credit unions are looking for ways to operate more productively.

Salary and benefits account for over half of all credit union non-interest expense, according to industry data from Callahan & Associates. Therefore, many credit unions are looking at ways to create a more engaged and productive workforce, to use self-service technology & to help employees focus on higher value-added activities, and to streamline processes for improving pull-through rates on loan applications. This week, we'll explore a number of different strategies in-depth during Productivity Week on CreditUnions.com. All of the metrics discussed below can be found for individual credit unions, asset-based peer groups, and state averages in the Search & Analyze channel on the Scorecard report.

PRODUCTIVITY SCORECARD
DATA FOR ALL U.S. CREDIT UNIONS AS OF SEPTEMBER 30, 2012
© Callahan & Associates | www.creditunions.com

  3Q 2012 3Q 2011
Full time employees (FTEs) 34 33
Members per FTE 390 388
Assets per FTE $4,201,378 $4,038,481
Loan and Share Accounts per FTE 922 912
Loans Originated per FTE $995,031 $790,789
Loan Income per FTE $987,33 $104,803
(NIM + Non Interest Income)/FTE $133,188 $125,054
Net Income per FTE $26,012 $19,452
Capital per FTE $473,890 $451,551
Average Salary and Benefits per FTE $48,700 $45,669
$ Rev. / $ of Sal. & Ben. per FTE $3.28 $3.49
YOY Chng in Avg Sal & Ben per FTE 3.53% 2.89%


Generated by CreditUnions.com Search & Analyze Scorecard.

Benchmarking Productivity Metrics

In the third quarter, productivity metrics look mixed on the surface, but a closer look reveals a good reason for this. Credit unions are hiring new employees to enable further growth of the industry in the future.

FTE EQUIVALENT GROWTH
DATA AS OF SEPTEMBER 30, 2012
© Callahan & Associates | www.creditunions.com

employees-and-growth

Generated by Callahan & Associates' Peer-to-Peer Software.

From 2002 until 2008, the number of members per employee for the industry steadily fell, from over 410 to a low of 370. In the second quarter of 2008 the trend reversed as credit unions focused on cutting expenses in response to the Great Recession and NCUA special assessments. During this period, the average number of members per employee rose to almost 390 as budgets tightened and hiring slowed.

This trend reversed in 2012 as credit unions started to see the success of their business model pay dividends. Over the past year, membership grew at an annual rate of 2.7% to 95.1 million members. At the same time, the number of full-time employees increased 3.0% to over 245,000, with salary and benefits per employee jumping to 3.53% as credit unions ramped up hiring once again. This growth in the workforce comes at a time of continued high unemployment and steady but slow economic growth, demonstrating that credit unions are doing their part to help the economy via increased hiring.

Because the workforce and member base are growing at similar paces in the third quarter, the members per employee ratio plateaued in 2012. The average for the industry currently stands at 387 members per employee. Credit unions with under $20 million in assets had the highest median, with 419 members per employee. Virginia led the rest of the nation in this metric with 472 members per employee. However, if you exclude Navy and PenFed, two of the three largest credit unions in the nation, Connecticut takes the top spot with 446 members served per employee.

MEMBERS PER FULL-TIME EMPLOYEE BY PEER GROUP
DATA FOR ALL U.S. CREDIT UNIONS AS OF SEPTEMBER 30, 2012
© Callahan & Associates | www.creditunions.com

members-per-employee

Generated by Callahan & Associates' Peer-to-Peer Software.

The members per employee ratio alone does not  tell the full productivity story. Another factor is  how much  employees are getting out of each member interaction. One credit union may decide on a lower ratio in order to provide more comprehensive service; another may take the opposite approach and focus on serving as many members as possible. To evaluate these strategies, credit unions can chose from a variety of productivity metrics that align with their business model.

Revenue per dollar of salary and benefits is a productivity metric used to gauge how much income is being generated for every dollar going towards employee compensation. In the third quarter, credit unions nationwide reported $3.28 in income for each dollar spent, down from $3.49 in the third quarter of 2011. The decline is due to revenue remaining flat while salary and benefits increased by 6.5% annually. This rise in compensation consists of two components – new employees being added to payroll and general salary increases for all employees.

Geography also exerts a large influence. When benchmarking this metric, credit unions would be wise to select a peer groups in locations with a similar cost of living to their own communities. If you exclude the big guns from Virginia once again, credit unions in Nevada came out on top among the 50 states, with each employee bringing in $3.51 for every dollar they receive in salary and benefits.

REVENUE PER $1 SALARY & BENEFITS
DATA FOR ALL U.S. CREDIT UNIONS AS OF SEPTEMBER 30, 2012
© Callahan & Associates | www.creditunions.com


map-legend

Generated by Callahan & Associates' Peer-to-Peer Software.

The importance of loan generation dictates that we evaluate loan originations per employee as a critical determinant of a credit union's productivity. This metric increased at credit unions during 2012 as loan originations rose 29.6% over year-to-date levels in 2011. Just under $1 million in loans were originated per employee through September, up 25.8% annually. Credit union employees in North Dakota take top productivity honors, generating $1.5 million in new loans annually. The impact of the current interest rate environment comes through clearly when reviewing a related metric: loan interest revenue per employee. Here, the nationwide average continues its decline along with the net interest margin.

LOAN ORIGINATION METRICS
DATA FOR ALL U.S. CREDIT UNIONS AS OF SEPTEMBER 30, 2012
© Callahan & Associates | www.creditunions.com

loan-originations

Generated by Callahan & Associates' Peer-to-Peer Software.

With increased hiring, credit unions are preparing for growth in the future. One key to success in 2013 will be making the most of this new workforce to grow member relationships.

 

 

 

Jan. 7, 2013


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