What Does the Future Hold for Credit Union Branches?

As members turned to online and mobile banking options to stay safe during the pandemic, speculation surfaced over whether the trend – which is expected to keep growing post-COVID – would lead executives to invest more resources in technology and shed their branch footprint by permanently closing some locations.

While some credit unions have taken that path, others are opening new branches. That’s because, they said, the old brick-and-mortar channel still offers them the best opportunity to establish a local market presence that attracts new members for future growth.

The $964 million Marine Credit Union in La Crosse, Wis., saw its members increasingly prefer online and mobile banking, and COVID accelerated that trend. At the end of 2019, more than 19,000 of Marine’s 76,858 members were using online banking. At the end of last year, that number soared to nearly 35,000, according to the credit union’s NCUA Call Reports.

“Habits have formed; consumers have spoken. Our ability to adapt quickly allows us to better serve members now and into the future,” Marine President/CEO Shawn Hanson told CU Times last June after he made the decision to consolidate the credit union’s branches from 37 to 19.

Marine said it knew the decision to close 18 branches would cause some members to leave, but the overall attrition has been less than what the credit union anticipated. According to its Call Reports, Marine lost 806 members from June to December last year.

“As with any change, some members have adapted well and are excited to be able to do more remotely with digital tools, while others have struggled,” Marine Chief Experience Officer Adam Keer said. “Many simply needed more education on our digital tools and have appreciated the efficiency of being able to manage their financial needs without having to leave their homes.”

While a few members have expressed they miss being able to go into a branch office, he said, some of the most powerful member service stories are about helping members connect to the broader digital world in 2020. “That connection has helped them become closer to their family and communities,” Keer said.

Last August, the $282 million Monterey Credit Union in Monterey, Calif., decided to permanently close three of its seven branches, according to a report in the Monterey County Weekly. Kathy Aliotti, vice president of member services, told the newspaper that it wasn’t just the ­pandemic that led to a slowdown in its in-person banking – since 1999, foot traffic has declined by about 80%. The credit union did not return CU Times’ requests for additional comments.

While the adoption of online and mobile banking is expected to keep growing once the pandemic finally ends, executives said the branch remains a viable channel for growth opportunities in new markets, where establishing a brand and community presence is essential to attracting new members.

Those new markets include rural or semi-rural locations that have been abandoned by banks, areas where there is little competition, regions that have become underbanked despite sizeable population growth, and in smaller cities that dot the expanse in between or are just outside major metropolitan centers.

In February, the $66.9 million American Partners Federal Credit Union in Reidsville, N.C., opened a new branch in Rocky Mount, Va., about an hour’s drive north of Reidsville. APFCU President/CEO Brian Bone said his credit union doesn’t want to open shop in big metro areas because it would be too difficult to compete.

“But in rural America, which the banks are retreating from, we see an opportunity,” Bone said. “And we believe that we can do real bona fide help in those communities. And so, we’re looking at this branch as kind of our hub to radiate from the center of the wheel.”

APFCU bought its new location from a big bank. “We see that as an opportunity because what happens is, especially among people of lesser means, it’s going to be hard for them to get in the car and drive an hour to get to a branch,” he said. “You are very correct that people are moving to online banking and I don’t think that’s going to change. But I think there’s also a huge need for people to have the ability to have a conversation with someone at a local branch, not with someone in a call center hundreds of miles away.”

Arlington, Texas sits in the middle of the enormous Dallas-Fort Worth metroplex. In between those big cities are more than 200 small cities and towns, which have been a sweet spot of growth for Texas Trust Credit Union.

When Jim Minge was named president/CEO of Texas Trust 10 years ago, the credit union was managing about $600 million in assets and operating only six branches serving 50,000 members. Through a combination of mergers and organic growth, the credit union has grown its assets to $1.5 billion in assets and currently operates 19 branches serving more than 121,000 members.

In February, the credit union broke ground for the construction of its third branch in Grand Prairie, a sizeable city that is home to more than 175,000 people.

But Minge said Texas Trust has primarily focused on opening branches in those small cities sandwiched between Dallas and Fort Worth. It operates locations in at least seven small cities: Athens, Flower Mound, Bedford, Mansfield, Hurst, Cedar Hill and Midlothian, all of which have populations under 100,000.

“We were blessed a few years ago to put up a facility in the Midlothian area (population: 29,000) and we built a great book of business there,” Minge said. “I think that business came to us because we had a facility there and we have been active in the community. That approach has worked well for us.”

Market research convinced the $6.2 billion Wright-Patt Credit Union in Beavercreek, Ohio to expand its branch network in Ohio’s capital city, Columbus, from six to 10 over the next two years. From 2010 to 2019, the population of Columbus has grown by more than 14% from 787,033 to 898,533, according to the U.S. Census. This year, the city’s population is projected to top 913,921.

“Columbus, despite its growth, is underbanked, and the way that is measured is that there is one bank branch for every ‘X’ households and the consultants we worked with said, typically you see that [X] number around 1,000,” Wright-Patt Chief Strategy Officer Tim Mislansky said. “And in Columbus, that number is significantly higher in that there are a lot more households per bank branch.”

Though many of the credit union’s members use online banking, he noted members keep saying loud and clear that they still want branches to visit when they need them.

“The technology is great, and we know we need to continue investing in that and offering our members more,” he said. “But we also know when a member needs us, we want to be there if they want to come in, sit down and talk to us face-to-face, because we know them and we know a significant number of our members still want that.”

Because members seem to want the best of both worlds, Mislansky pointed out, it is becoming more challenging for credit unions to determine how to maintain enough of a brick-and-mortar presence for growth while also investing sufficient resources in technology to remain competitive.

“It’s not so much of a question of doing either or, it’s more of a question of how much of a dollar do you spend on physical branches versus how much of a dollar do you spend on the digital side of it,” he said. “It’s a balancing act because you’ve got to spend money in both places.”