(This story is brought to you in collaboration between S&P Global Market Intelligence and the California and Nevada Credit Union Leagues)
Growing membership has led U.S. credit unions to ramp up hiring, while continued consolidation in the banking space has kept the total number of bank employees in check according to an analysis of recent data.
Other factors—including growing bank fees, along with headlines such as the recent Wells Fargo & Co. sales scandal—will only increase membership at credit unions and the need for more employees, said Lee Weisiger, managing director of human resources consulting firm Gallagher Titan. He also said many credit unions have started embracing mobile technology and social media, which has led to millennials joining. Older customers are less likely to leave their banks while younger people have fewer reservations.
“People who are in their 50s and 60s are not going to change their banks, but people who are just entering the consumer world will," Weisiger said.
In fourth-quarter 2016 there were 267,000 full-time employees at U.S. credit unions, a 31 percent increase since first-quarter 2006 (or 281,000 total employees according to an analysis of call-report data by the California and Nevada Credit Union Leagues—a 37 percent increase). In California total employment rose 22 percent to 28,200 over the same period, but in Nevada it dropped 12 percent to 1,120.
But for commercial and savings banks, full-time employee growth more often turned negative than it did positive during that same 10-year period.
Stacy Stevens, CEO of banking recruitment firm Park Avenue Group, said she’s not surprised by the downward employment trends at banks because so many community institutions are being gobbled up. The big banks have also cut back and combined departments and divisions, such as business banking merging into middle-market commercial lending.
But the growth in credit union hiring is surprising, Stevens said. One possible explanation is that bank employees are gaining more of an employment foothold in that space.
Weisiger said some credit unions want to diversify their talent by considering bank employees for their hiring needs. "As they grow and get bigger, they want more sophisticated talent,” he said. In fact, one New York credit union told Weisiger it will only look at candidates with banking backgrounds.
S&P Global Market Intelligence also reviewed quarterly salary and benefit expenses as a percentage of average assets on a last-12-months basis to avoid seasonal spikes in payroll expenses that often occur in the fourth quarter. Salary and benefit expenses include gross salaries, wages, overtime, bonuses, Social Security taxes, state and federal unemployment taxes paid, and retirement plan contributions.
The median salary and benefit expense as a percentage of average assets for U.S. credit unions was 1.71 percent at the end of 2016, down from nearly 2 percent in late 2008. This same metric for U.S. commercial and savings banks was 1.57 percent at year-end 2016, down from 1.62 percent in 2008.
For banks and credit unions, information-technology positions are the toughest to fill, Weisiger said. Credit unions tend to pay a little less than banks and may need to increase their pay scales to attract these workers. Part of the problem is that IT workers in other sectors have a tough transition to the financial services industry.
"You can't just take someone from IT in manufacturing and put them in financial services,” Weisiger said. “It's just a different market. Competition for those workers from banks and investment management firms is fierce.”
For all types of employees, credit unions above $3 billion in assets spent much more per worker than their smaller counterparts. The median salary and benefit expense per employee was $84,000 at the largest credit unions, while at credit unions below $100 million in assets it was just $52,000 as of late 2016.
In an analysis of the top credit unions by salary and benefit expense as a percentage of gross income, Appleton, WI-based Thrivent FCU came in with the highest relative costs at 70.98 percent. By way of comparison, the median salary and benefit expense as a percentage of gross income among all credit unions over $250 million in assets was 35.35 percent in fourth-quarter 2016. Thrivent FCU had 392 members per full-time employee—significantly higher than the industry median of 354.
Weisiger said salaries for bank and credit union executives are often comparable, but the big difference is in the stock packages that banks can offer. However, it is much easier for a bank executive to make the switch to the credit union side than vice versa, he said. Some bank executives have moved to a credit union as a "second career" because the positions tend to be less political and there are no shareholders to appease.
“There's no pressure every quarter,” he said.
(Click here to see all graphs/charts associated with this story, including: growth in employees, salary and benefit trends, salary expense trends by asset size, and top credit unions by salary and benefits as a percentage of gross income)