3 Branch Placement Strategies

Demographics, financial services, and an eye on profitability help three credit unions determine where to open new branches.


You’ve heard the bromide about the three most important things when buying real estate: location, location, location. Well, the same can be said of opening a credit union branch. As the total number of branches continues to shrink — down 2% in just the past year alone — their location has never been more important.  With a smaller footprint in the community, credit unions can’t afford to be in out-of-the-way places that inconvenience members or inhibit future growth.

Although there is no one-size-fits-all solution to choosing a branch location, credit unions should have a strategy in mind when selecting new sites. The examples that follow are of three credit unions that relied on different strategies to find the best location for a new branch.


  • ASSETS: $2.17B
  • MEMBERS: 177,083
  • EMPLOYEES: 405
  • 12-MO SHARE GROWTH: 8.63%
  • 12-MO LOAN GROWTH: 15.16%
  • ROA: 1.43%
  • BRANCHES: 15

Rethinking An Earlier Expansion

When Coastal Federal Credit Union ($2.17B, Raleigh, NC) opened 11 branches during the booming economy of the early to mid 2000s, the strategy was simple. The credit union just moved into areas where it had members but no branch.

“I don’t know if we looked at it as strategically as we could have,” says Joe Mecca, senior marketing analyst at Coastal Federal.

That changed after the recession. Between 2008 and 2010, Coastal Federal began to rethink where and how its branches were distributed, and even assessed potential sites that might be better. When vetting a new location, the credit union considered where its members lived, worked, and shopped as well as the site’s potential for growth. In the process it took stock of its underperforming branches.

“That was the first phase of the optimization plan,” Mecca says. “We either upgraded or relocated these branches.”

A significant part of that upgrade included converting some of the credit union’s older branches into personal teller machines. PTMs have a built-in cash dispenser and offer a sophisticated video interface with a credit union employee. Because the employee didn’t need to be at the same location as the PTM, Coastal could house all its human tellers in one central place to maximize efficiency and make training easier.

Coastal upgraded all of its branches and relocated two of them, tailoring its employees — both through hiring and training — to each site so that they could deliver the financial services that members were most likely to need there.

Although members receive the same base level of service from the PTMs at every branch, each location also has account managers and relationship managers who can process loan applications, open accounts, and provide more sophisticated services than the teller. Coastal Federal customizes its branches with its mortgage officers and financial advisors.

“Not every branch has a designated loan office, but we have mortgage officers that spend scheduled time at branches that do a higher volume of mortgages,” Mecca says.

Each branch provides more of the services that its distinctive customer base requires. Branches heavy on wealth management, for instance, offer financial advisors who may serve three or four separate locations, spending the most time wherever there is the greatest need.  

For its two relocated branches, Coastal analyzed debit card use to identify sites that offered the greatest potential for growth.

“This gets into the last phase of branch optimization, filling in the gaps of where we don’t have branches,” Mecca says. “We’re still looking at where members live and where they work like we used to, but now we also consider where they are doing a high volume of transactions.”

Though its branching strategy does not account for all of the credit union’s success, the shared resources and relocation strategy paved the way to a successful 2012. Coastal Federal boasted a 1.43% return on assets, a 72.2% loan-to-share ratio, and 15.2% loan growth for the year, all well above national averages.

Pockets of high retail use are the obvious choice for locating branches, but some credit unions also consider the shopping habits of their membership. KeyPoint Credit Union ($785.6M, Santa Clara, CA), which predominantly serves members in the technology industry, tries to anchor branches at stores its members are likely to shop at, such as Frye’s Home Electronics.


  • BECU
  • ASSETS: $11.1B
  • MEMBERS: 800,736
  • EMPLOYEES: 1,127
  • 12-MO SHARE GROWTH: 10.97%
  • 12-MO LOAN GROWTH: 1.29%
  • ROA: 1.36%
  • BRANCHES: 43

A Shift Toward Greater Visibility

In-store branches, however, also have drawbacks, as BECU (formerly Boeing Employees’ Credit Union, $11.1B, Seattle, WA) discovered. Although BECU prized its in-store branches, their limited space and cloistered setting inhibited the credit union’s market potential. As a result, BECU shifted its strategy by converting many of its in-store locations to independent retail sites. The move had nothing to do with underperformance, BECU says, but rather with better managing the surplus of activity the branches currently handle.

Like Coastal, BECU also operates a teller-less system. Branches typically have two ATMs, two online kiosks, an express drop box for after-hours deposits, three member consultants, and a manager. The relocated branches offer all the same features and are staffed with at least one additional member consultant. Most importantly, the branches have additional waiting areas as well as room for automated services to be added in the future.

BECU’s stand-alone branches are more visible and accessible because they are on major transportation routes for commuting members as well as near other retailers. Although the stand-alone locations have higher rents than those in store, BECU considers them an essential investment for future growth.


  • ASSETS: $3.19B
  • MEMBERS: 248,750
  • EMPLOYEES: 481
  • 12-MO SHARE GROWTH: 6.54%
  • 12-MO LOAN GROWTH: 2.15%
  • ROA: 0.94%
  • BRANCHES: 22

An Eye on the Bottom Line

In stark contrast to industry trends, OnPoint Community Credit Union ($3.2B, Portland, OR) has more than doubled the number of its branches in the past six years, expanding service to counties outside the Portland metro area, including Deschutes County in 2009 and Crook and Jefferson Counties in 2011.

When choosing a new location for a branch, OnPoint considers the demographics of its existing members first and its potential members second. Then the credit union studies traffic patterns in the area as well as the competition from nearby financial institutions.

After taking all these factors into account, OnPoint sets an ambitious goal for the new branch: It should begin turning a profit in the first 18 to 24 months so that the credit union’s return on assets isn’t compromised.  OnPoint estimates a new stand-alone branch costs the credit union about $750,000 the first year while a new in-store location costs about $350,000. But the potential return for each of those investments is significant. OnPoint expects to add new members at the rate of 100 per month at a stand-alone location and 50 per month at an in-store site, a healthy growth rate that more than makes up for the steep initial cost.

Aaron Pugh contributed to this report.