Union National Financial Corp. in Lancaster, Pa., is brewing up an experiment in retail banking.
Since April the $511 million-asset company has opened two branches, under the Gold Cafe brand, that double as coffee shops. Union National is counting on the branches to elevate its profile in the competitive Lancaster County market, where larger local companies, such as Fulton Financial Corp., hold a commanding retail deposit share.
“Banking is a commodity today, and you really have to do something to get noticed in the crowd,” said Mark Gainer, Union National’s chairman and chief executive officer.
Union National is hardly the first banking company to give branches a coffee-shop feel, but it is believed to be the first to operate such branches under a separate brand.
Also, such branches, which tend to be more common in large markets like New York and Philadelphia, are relatively untested in less urban areas, said Jeff Marsico, executive vice president of Kafafian Group Inc., a Parsippany, N.J., strategic planning and profitability consulting firm for community banks and thrifts.
Mr. Marsico, who works out of an office in Lancaster County, said he applauds Union National for trying something new. “If you look around, banks are becoming more and more homogenous, and people are becoming less and less loyal to their local bank.”
Banks need new strategies to pull customers into branches, which need a bigger deposit base than they did in the past to become profitable, he said.
Union National is the parent of the 153-year-old Union National Community Bank, which has 10 branches and ranks No. 9 in deposit share in Lancaster County, with 4.08%, according to Federal Deposit Insurance Corp. data. (By comparison, the $15.6 billion-asset Fulton has a deposit share of just under 20%.)
Well known in the northwestern corner of Lancaster County, Union National Financial is trying to bolster its operations in the rest of the growing county, executives said. Last year the company moved its headquarters from Mount Joy to Lancaster.
The first Gold Cafe branch opened in April near a local community college in the city’s eastern end. The second opened last month west of the city. A third is expected to open next fall.
Union National executives said they wanted a branch design that offered people a reason to drop in.
People who begin frequenting the branches for coffee — and get to know the employees — eventually might decide to become bank customers, Mr. Frey said. “We decided to create a new space for that element that’s eager for something different.”
Union National does not make money selling coffee; that side of the business is run by Lancaster County Coffee Roasters Inc. However, the branch employees are trained as both baristas and tellers; an employee could be brewing lattes and cappuccinos one day and taking withdrawals and deposits the next.
Customers cannot make financial transactions at the coffee counter. Tellers are available through a remote system accessible through kiosks at the back of the branch. Loan officers are available in an office set off to the side of the coffee counter.
Other amenities include a drive-through, a community room where local groups can meet, wireless Internet access, and ample space for people to hang out, read newspapers and magazines, or watch television.
The branches also have extended hours. They are open from 6:30 a.m. to 7 p.m. on weekdays, from 7:30 a.m. to 7 p.m. on Saturdays, and from noon to 5 p.m. on Sundays. The longer hours have increased operating costs, but bank executives say that they are confident that the branches will break even within two years of opening. The executives would not discuss the new branches’ performance so far, except to say that foot traffic has been high.
Joe Patterson, a spokesman for Sterling Financial Corp., the $3.2 billion-asset Lancaster parent company of Bank of Lancaster County and six other community banks, said the company is monitoring Union National’s progress but is not ready to follow suit.
“We’ve got a successful business model where we emphasize customer service through community banking, and I think we’ll be very cautious about changing from that model,” he said. “We’re not close-minded about innovation, but we would be more apt to use something that’s proven than something that’s just being tested.”
