Branches Without Borders: 5 Tips for Credit Unions Expanding Far From Home

When the Liberty Lake, Wash.-based Spokane Teachers Credit Union decided to open a new branch in Pasco, Wash. – more than 100 miles away from its home base and main cluster of branches around Spokane, Wash. – President/CEO Ezra Eckhardt knew there would be work to do. The credit union, which has $3.1 billion in assets and about 195,000 members, already had 23 other branches under its wing. Trying to build and operate a branch far outside the credit union’s geographic epicenter meant added time and expense, even though the move would fortify STCU’s reach in the bourgeoning Tri-Cities area, whose population growth rate since 2000 is expected to exceed 50% by the end of this year, according to the Washington Office of Financial Management.

“About seven or eight years ago, the credit union had made a decision to try to open up one or two new branches every year,” Eckhardt told CU Times. But about four years ago, an influx of competitors in Spokane prompted the credit union to reevaluate the growth rate it could achieve inside the membership-dense 30-mile radius of its existing market versus the growth rate it could achieve in new areas, he said.

STCU’s approach seems to be paying off. Eckhardt said the credit union already had about 3,000 members in the Tri-Cities area before putting a branch there; when it established a physical presence, the credit union added another 3,000 members. STCU now has two branches in the Tri-Cities area, a third on the way, and its eye on reaching 25,000 members in that market. Its goal is to become a $10 billion credit union.

The successful outpost expansion strategy, Eckhardt said, had a lot to do with good execution, being prepared and staying organized. Here are five tips for other credit unions thinking about opening branches far from home.

1. Hire Ahead, but Differently

Credit unions have to staff faraway branches ahead of time, just as they might for any future branch. But when that new branch isn’t exactly right around the corner, staffing up may need to happen even earlier. Plus, the pre-opening activities that those new employees have to manage may need to be different.

At STCU, the branch manager, community relations manager and mortgage team leader were the first three employees hired, according to Eckhardt. And those three pioneering employees did more than just set up shop.

“We hired ahead – our branch managers – and they focused on member relationship building,” he said. “We also hired ahead a community relations team; that started as one person and then expanded to three people. So we started education through the school districts and through some of the community colleges on adult education. We also used that team to support local events,” he explained.

Eckhardt added, “The three leaders … they sort of formed a working group and they managed the presence of the credit union in the marketplace.”

2. Modernize Training Programs

Credit unions that do a lot of hands-on training may have to change their tactics if they’re opening a far-flung branch.

“I’d say the most complex part of it is managing the new hire orientation,” Eckhardt said. STCU, for example, provides an intensive two-week training program that includes a series of classes around systems, culture, job descriptions and organizational design. But in-person training classes that start at 8 a.m. aren’t going to work for new employees who are 100 miles away.

“Those classes are really taught at our headquarters … and it’s really not very scalable for us to tell those people that every time they need to learn something, they have to drive to Spokane; it gets to be a haul,” he said. “We’ve created some alternate forms of training and knowledge transfer.”

3. Check the Local Data Speeds

Credit unions heading into new frontiers should be sure they understand the digital infrastructure available there, especially if they plan to offer digital assets in lieu of human services, Eckhardt warned. If a credit union’s electronic offerings don’t work well because data speeds are slow or patchy in an area, for example, members blame the credit union, not the infrastructure.

“We have a number of ATMs that are offsite from our branches, and sometimes getting the power and data to those locations is problematic,” he explained. “We have an ATM in Suncrest, Washington, which is kind of right on the border of Stevens County, just immediately north of Spokane. And it is a smaller town, but just getting the right type of data access – the fiber line that runs in there. We’ve got another ATM in Deer Park, Washington, which is really only about 10 miles north, but getting the high-speed connectivity for the ATM there has been a little bit of a problem.”

He added, “It’s about experience for the members, because it appears like the device is a little bit wonky.”

4. Beware of Recycling Marketing Plans

Credit unions opening branches in distant areas may have to rework their marketing plans – and their marketing budgets. If the new branch is in a different media market – that is, a different Metropolitan Statistical Area or Designated Market Area – a credit union could find itself having to spend much more for advertising.

“The cost of advertising in the Tri-Cities is substantially higher for print, social media, TV and radio – it’s consistently higher across the board,” Eckhardt said. “Every market is going to be a little bit different. Doing the homework around what channel is going to get you connected to more of your current and potential members is important. We have modified our approach on how we use our limited resources to get our messaging to the right people, and it’s been effective.”

5. Find the Right ROI Philosophy

It’s reasonable to be skeptical about outlying branches, given the extra time, expense and effort that they can require. But Eckhardt said having the right perspective is key to setting realistic expectations about the financial rewards from a strategy of opening distant branches.

“We think it is an important part of a balanced approach to grow the accessibility for our membership,” he said. “You can’t just grow branches to physically expand. It needs to be a part of an interconnected strategy to increase the connected touchpoints that you have with your members.”

Eckhardt said many of the financial models he’s seen credit unions use tend to target a five-year breakeven. But it’s possible to get to breakeven faster, he said.

“I think if it’s a well-coordinated approach and if you follow a plan that focuses on expanding the member relationship first, three years is totally possible to get breakeven for the market expansion,” he noted. “And then if you coordinate that with the expanded digital strategy, you can accelerate it from there I think.”

Expansion is what it’s all about, after all.

“We have every opportunity to become a $10 billion credit union,” Eckhardt said. “If you draw a really big circle that goes from the Canadian border around to the Cascades, down through southern Idaho, and then back up through the Rockies … there are really no other $10 billion financial institutions in that circle.”

He added, “In the grand scheme of things, a hundred miles isn’t really that far.”