MILWAUKEE, Wis.-Credit unions considering tapping into capital this year to build new locations should like the price tag, said one strategic planner who suggested that timing of branch openings will be key to their long-term success.
Bill Minahan, president of BCI, which specializes in branch design and construction, said his organization "has never seen" economic events align as they have to lower costs to build a branch.
"With the cost of land and the downward pressure there, and the cost to construct a building and the downward pressure there, it's a wonderful time for those in a strong position to do something," Minahan said.
Minahan understands that expansion does not fit with all credit unions' plans. "There seems to be two kinds of credit unions now: Those that are in good markets with good members and strong capital positions aggressively wanting to grow. And then the other guys who are scared and feeling the effects of this economy. For those that are scared, to take earning assets and convert them to non-earning assets, obviously is not a good decision today. However, those that are in strong positions could not be expanding at a better time."
The advantages are greater than just low cost, reminded Minahan, who pointed to banks providing credit unions the opportunity to grab share. But the low costs could be what prompts most to pull the expansion trigger, he said. "We just bid a project in Oklahoma and the numbers from the contractors we are seeing are pretty low."
Compared with building a branch two years ago, Minahan estimated costs today have declined 10% to 15%.
To take advantage of the low prices and be in a good position to capitalize on the market if it turns around, Minahan recommended that credit unions thinking about expansion not wait too long.
"Who knows what will happen in 2009. But wouldn't it be good to be in a position that if mid-'09 it started to look like this economy was coming back and you were ready to take advantage of that?"
Minahan stressed his point is that due to the time it takes to build a branch-find the land, get the bids, etc.-"it's usually too late when things start to turn around to take advantage of the market. When you are in the middle of a tough economy, everything looks bad. When it has recovered you can look back and kick yourself for not doing anything."
For info: www.bcihq.com.
