ATLANTA-With former bank branches increasingly available for purchase, there are opportunities for smart buyers, according to Will Klein, senior consultant, and Rebecca Butler, consultant, with KDA.
What factors should credit unions be weighing when considering buying a former branch of another financial institution?
Butler: The first piece is: what is the strategic focus of the credit union? Was it looking in that market anyway? If a property becomes available in a market in which it was looking, that property is in play as is any other.
Klein: In addition to that, it is a case of what will work for it. If a credit union is in a marketplace that is really tight, it should take advantage of opportunities that come along. But, we would not recommend going after something just because it is available. Make sure it is going to fit in to what the credit union as an institution wants to do.
Butler: Going after an excess of branch inventory from bank mergers should be a proactive search in markets in which the credit union is already looking. The design/build world of financial institutions is very sensitive to this. The key issue is a credit union implementing its own strategic plan, not being a victim of other people's problems.
Is it correct to assume a branch probably is in a poor location if another institution gave up on it?
Butler: Buying a branch that just has to be remodeled or rebranded is much faster than building. Buying a piece of property and building a branch can take a year. Remodeling can take just six weeks.
Klein: Is it necessary to completely remodel? That depends on the property or the building. The credit union wants to make the facility into its own image, so people know it is not a branch of BofA or Wachovia or whatever.
Butler: Do you want to be in all the markets you want to be in? Are branches available in groups or are individual branches available? Some banks might require you to buy five branches as a group.
Is it cost effective to buy a branch of another institution? Or should they build a new branch in a prime locale?
Butler: The lower-performing branches are the ones that get closed in a merger.
Another issue to consider is: as banks get merged, they not only are getting rid of buildings, they are getting rid of staff. Part of the research into the market is to look at hiring those people. Mergers create an opportunity in property and staff available.
Klein: The key word there is opportunity.
With land prices dropping, is it a good idea to "bank" a location for the future?
Klein: Certainly the location is every bit the consideration. The type of building, the ingress and egress, all must fit the credit union's needs. If the branch doesn't have everything the credit union needs, look elsewhere. One caution in looking at this topic is the importance of the individual situation. There is no blanket answer-all good or all bad. How everything blends together and fits the plan to serve the membership going forward depends on each CU's circumstances.
