Branch building may slow but not expire, CUNA council report says.

Don't count new branches out.

According to a recent CUNA Operations, Sales and Service Council white paper entitled "Branch Strategies," branch building will continue in the near future, but it will be tempered by economic realities and lack the aggressive posture of the past.

Despite the investment required with branch expansion, the paper found that branches generate a better than average adjusted ROI and branch locations drive checking growth and primary financial institutional status.

Research conducted by the Applied Research Institute of the California and Nevada leagues cited in the paper found that a single branch office may cost between $1 and $4 million depending on land values. In addition, 45% of consumers who opened a checking account did so because they moved or changed jobs and desired a more convenient branch location. About 33% of consumers who closed a checking account did so because they desired a more convenient branch location. About 70% of consumers also indicated their primary financial institution has a location less than three miles from their home or work. As for online banking-it doesn't replace branches as consumers that use online banking still make an average of 2.3 branch-based transactions monthly. For most institutions, online banking is a critical component of an integrated delivery strategy not a way to off load branch traffic.

Even shared branching, while it provides a way for credit unions to deliver member convenience is no replacement for a proprietary branch expansion strategy. The research revealed that members with multibranch access within five miles of their residence have checking penetration of 61% and average core deposit balances of $7,916, compared to members with no branch access having 41% checking penetration and average core deposits of $4,164.

Looking ahead, the paper suggests that credit unions revisit the grocery store branch business model as more switch to community charters. The advantages of such branches range from guaranteed foot traffic and cost savings to providing consumer convenience. In addition, as the branch evolves from a transactional role to more of an advisory role, expectations of branch staffers will shift accordingly. The new branch employee will not only have to be fully cross trained in all areas but also serve as the relationship builder.

"Many members are looking for a conversation, even an emotional connection--albeit brief--when they come to a credit union. In a fast moving and sometimes unforgiving culture, the credit union setting can be a comfortable oasis where the member can expect an environment of warmth and trust. And credit union employees need to go the extra mile to develop this setting. In the competitive financial services industry, consumers will shop around for their financial institution of choice.

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