Credit Unions Grow Branch Count While Banks Slash Locations

Credit unions are adding branches at a time when most banks are closing them amid the increasing digitization of finance.

In 2021, the credit union industry added 46 branches by opening 310 and closing 264 while the banking industry produced a net figure of 2,927 closings, a record high. Banks have accelerated plans to consolidate branches as the COVID-19 pandemic led to greater consumer adoption of mobile channels, and the industry has increased its technology spend to better compete with digital-only banking startups that have made market share gains.

But credit unions depend on membership, which could be more tied to retail branches than customer acquisition might be for a bank, said Paul Davis, director of market intelligence for advisory firm Strategic Resource Management. "I think credit unions, on average, are probably under-branched as opposed to banks who are probably over-branched," Davis said in an interview.

Credit union branch growth might also be tied to the branch cuts at banking institutions, said Michael Bell, co-chair of the financial institutions practice group at Honigman LLP. Retail branches act as a marketing tool for depositories, providing a tangible commitment to the local community, Bell said.

"I think some of it has to do with banks shrinking, so when a possible competitor or similar provider is leaving the space, there is a reason [for credit unions] to get going into that space," Bell said in an interview.

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