By Austin Wofford
For decades, credit unions have evaluated branches using some variation of branch profitability. Revenue is assigned to a location, expenses are accumulated or allocated, and management determines which branches are profitable and which are not. The resulting reports look precise, but the underlying question is whether they actually measure the economic role a branch plays in today’s credit union.
The problem is that members don’t behave according to the organizational structure used for financial reporting. A member may establish a relationship at one branch, originate an auto loan at another, maintain substantial deposits, visit several locations for service, and conduct most routine transactions digitally. Yet traditional branch reporting often requires the entire relationship to be assigned somewhere. Branch Value Analysis (BVA) takes a different approach: it measures where economic value is actually created and supported.
Origination and Servicing Are Different Contributions
Consider a branch that originates a highly profitable loan. That branch helped create economic value for the credit union, and it should receive recognition for that contribution. If the member subsequently moves or begins using another branch, the economic value created by the original location shouldn’t simply migrate with the member’s branch assignment.
At the same time, the second branch may be providing meaningful ongoing service to that relationship. Its employees answer questions, solve problems, process transactions, and maintain the member relationship. That contribution is real as well, but it is fundamentally different from originating the business.
Separating these two roles changes the analysis. BVA asks how much economic value a branch creates through origination and how much value it supports through ongoing relationships and servicing. Those contributions can then be evaluated against the residual branch-specific operating costs required to maintain the location.
Volume Is Not the Same as Value
This distinction also exposes another weakness in traditional branch measurement: production volume is frequently treated as a proxy for success. A branch originating a large volume of loans may appear to be performing extremely well, but volume alone says little about the economic value of those loans after considering pricing, funding, credit risk, capital requirements, expected life, and other economic factors.
The opposite can also occur. A relatively low-volume branch might originate fewer but substantially more valuable relationships, maintain an attractive deposit base, or provide important support to highly valuable members. Looking only at balances, accounts, transactions, or revenue can cause management to reach the wrong conclusion about both locations.
This is where instrument- and relationship-level profitability becomes important. Multidimensional Value Analysis (MVA) first establishes the economic contribution of individual loans, deposits, and relationships. BVA then becomes an attribution layer: it determines which branches should receive credit for creating or supporting that value rather than treating the branch as an isolated accounting calculation.
A Branch Can Create Value Without “Owning” the Member
This is particularly important as delivery models become increasingly complex. Members interact with branches, contact centers, digital banking, lending teams, and other channels. The idea that one location somehow “owns” a member becomes increasingly difficult to defend.
A better approach is to follow the economic activity. The branch that originates valuable business should receive recognition for creating it, while locations that subsequently support the relationship should receive appropriate recognition for their servicing contribution. Where several branches service the same member, actual servicing activity can provide an objective basis for distributing that portion of the value without duplicating it.
This produces a much richer picture of the network. Management can distinguish branches that are strong originators, locations that primarily support existing relationships, branches that successfully perform both roles, and locations whose economic contribution may not justify the resources committed to them. In simple terms: Branch Economic Value = Value of Business Originated + Value of Relationships Serviced – Branch-Specific Operating Costs.
The Management Question Changes
Once branch performance is viewed this way, the question is no longer simply, “Is the branch profitable?” A more useful question is, “What economic role does this branch play in creating and supporting member value, and is that contribution sufficient to justify the resources committed to the location?”
That is a substantially different management conversation. It can inform decisions involving staffing, hours, investment, consolidation, expansion, relocation, and even the purpose of individual branches within the overall distribution strategy. It also provides boards and executive teams with a stronger economic foundation for evaluating significant branch investments.
Importantly, this does not mean every branch must perform the same role. A location designed primarily for business development should be evaluated differently from one that functions primarily as a servicing hub. The objective isn’t to force every branch into the same performance model; it is to understand what each location actually contributes.
From Branch Profitability to Branch Value
Credit unions have spent decades asking whether individual branches are profitable. With better profitability analytics, they can ask a much more useful question: What value does each branch actually create and support?
That requires looking beneath accounting assignments and branch codes to the economics of the underlying loans, deposits, and member relationships. MVA determines where economic value exists. BVA determines which branches create and support that value by separating origination from servicing, then applying branch-specific operating costs without duplicating direct costs already embedded in the underlying economics.
For executive management, that shift turns branch reporting from an accounting exercise into a strategic management tool. It distinguishes a busy branch from a valuable branch, a strong originator from a strong servicing location, and a genuinely weak location from one that simply looks weak under conventional allocation rules. As physical and digital distribution become increasingly intertwined, understanding the actual economic role of each branch may be far more important than simply knowing whether the branch P&L ends in the black.
Austin Wofford is vice president with Kohl Analytics Group, which helps financial institutions understand the economic drivers of products, relationships, activities, and strategic decisions through advanced profitability and management analytics. Since 1996, Kohl has focused on giving executives greater confidence in the decisions that drive financial and organizational performance.
