Honor Credit Union purchased five former Huntington Bank branches earlier this year.
Two of these locations represented the only financial institution in their local communities and would have created banking deserts without Honor’s acquisition.
Through community partnerships and smart branch updates, the credit union expects to hit its break-even point in the next six to 12 months while serving vital community needs.
Honor Credit Union ($1.47B, Berrien Springs, MI) has a well-developed and refined retail strategy broken into four separate geographical areas. When Huntington Bank had to divest 13 Michigan branches due to an acquisition, the credit union considered 11 of those locations before narrowing it down to seven and, ultimately, purchasing five of the bank’s former branches.
“We established our priority areas just over a year ago,” says CEO Scott McFarland. The locations Honor acquired all fit within the credit union’s highest-priority area, giving the cooperative an opportunity to expand its footprint, shore up space for future operations, and offer more than one office in areas like Wyoming and Grand Rapids.
Scott McFarland, CEO, Honor Credit Union
Since Honor’s charter covers the whole state of Michigan, field of membership wasn’t an issue.
An Invitation to Serve
The cooperative’s reputation for building strong community partnerships preceded it when news began to spread that the bank would be shuttering some of its locations.
“One of our members, a local farmer, reached out to me directly when they heard their local office was going to shut down with no other financial institution in town to serve them,” says McFarland. “They said they’d love to have us in town.”
In another community, the city manager reached out to a state representative to see if Honor would be interested in taking over the former bank’s location, as they were familiar with the cooperative’s work in other nearby communities.
This resulted in an interim pop-up branch inside City Hall in Hartford, MI, to ensure citizens’ banking needs were served prior to the new branch opening. “We’d go there a couple days a week for about six to eight months because the community knew the bank branch was going to close and wanted to open new accounts with us to prepare,” recalls McFarland.
Two of the five former bank branches are now open as Honor locations with two more expected to open this year and the last location planned for 2023. This is a fast transition, considering that negotiations began in 2021 and the new locations were only acquired at the beginning of 2022.
A Window Of Opportunity
While a thorough evaluation and in-person walk-throughs helped Honor avoid any major surprises at the locations acquired, timing is everything when it comes to capitalizing on market share from another institution. According to the CEO, the biggest challenge was locking down the deal quickly with so many parties involved.
“We know the window of opportunity is very small as bank customers may find it easier to simply leave their account there even if the local branch is gone,” says McFarland. To combat this, the credit union leveraged other area locations and its member call center to pick up market share.
Honor was quick to execute strategic marketing campaigns in its new markets, including grassroots components such as local community event partnerships and sponsorships. They’ve also paid aggressive bonuses for area consumers moving their accounts from another institution. This targeted approach pays a $250 bonus for checking accounts with direct deposit and keeps stipulations simple with just a few transactions required to earn the extra cash. Honor’s suite of standard offerings, including a 3% APY on Benefits Checking, are also attractive locally.
A Focus On Smart Updates And Early Success
“We’ve got a very good COO,” says McFarland. “She’s on top of things and had a good plan for these branches.” Honor isn’t doing a lot of expensive upgrades on the outside of its buildings, instead management is focusing on branding the inside and making the locations nice, but low-key.
By keeping investments low on updates and leveraging the value of existing buildings versus constructing new ones, Honor expects its new locations to become profitable in the next six to 12 months if the cooperative remains focused on its relevance in each community.
“This isn’t ‘Field of Dreams,’” quips McFarland. “Just because you put a branch there, doesn’t mean they’ll come. Showcasing the community has brought us a lot of goodwill and been very effective.”
And while the credit union is still early in the process, it has already opened 105 accounts in less than a month in Hartford, MI, with a population of just under 2,600 people.
CU QUICK FACTS
HQ: Berrien Springs, MI
Data as of 06.30.17
12-MO SHARE GROWTH: 14.98%
12-MO LOAN GROWTH: 13.27%
A Personal Approach (In A Remote World)
Another lesson McFarland shares is to never underestimate how much communities still want and need a local financial institution, even in a remote world. “There are communities out there that can be very good opportunities for credit unions if cooperatives are focused on keeping operations efficient and investing in those communities,” says McFarland.
While some may question whether it is viable to go into markets where banks are leaving, the CEO likens the opportunities there to those in commercial banking. “Banks may say no to small business loans we’re fine with – there’s lots of room to live under the elephant. And there are lots of opportunities to take care of those members in communities abandoned by banks measuring success by different metrics.”
The consumers in would-be banking deserts are very gracious. “We’re not saving them, we’re partnering with them and it’s great to be a new business in a place that really welcomes you,” says McFarland.
A Center For The Community
In terms of advice for others, McFarland recommends building a strong plan, having clear metrics in place, knowing your voice, and, most importantly, knowing the community. Don’t assume all underserved communities are the same.
“Our member centers may be a focal point in the center of these communities, but we’re not there for the community to center on us,” says McFarland. Honor’s approach puts the focus on the communities the credit union is serving.
McFarland notes that while a community may be thrilled to have a local financial institution, members may not physically show up every day, so Honor doesn’t focus exclusively on lobby traffic. Instead, management and staff track how members interact with the credit union holistically, and have seen activity increase as awareness from the local office draws in new members and encourages account movement.
“Credit unions can’t forget that they’ve been thriving in the market of people banks left behind since the beginning,” says McFarland. “Our industry has a unique opportunity right now. People need us more than ever.”