"It seems basic but branch closures can often be prevented by some research and market analysis--don't pick a site just because you think you should be there. It is a substantial financial investment so take the time for due diligence," said PWCampbell President/Chief Operating Officer Jim Caliendo.

He adds that credit unions also need to consider local economic factors: Is there a decrease in population? Are major businesses in the area closing? If dependent on a single SEG sponsor, does the credit union have a plan in case the SEG closes? "From the beginning credit unions have to do a branch profitability assessment to assess how a branch is doing financially," said Caliendo. "Built into the system there has to be a true way to make a financial analysis of a branch. Typically branches should be breaking even within a 24-month period."

Even if the branch isn't hitting the typical target goal or there are signs of an economic downturn, Caliendo says there are still some steps that can be taken to turn the branch around.

"Talk to local authorities to find out what type of development is coming or going in the next few years. Do a member and employee survey to find out what is wrong," said Caliendo. "Branch employees can tell you what goes on day-to-day that maybe the people who are making the decisions might not see. Also it could be a matter of building more awareness through marketing and advertising in the local area."

He says to give the changes a chance and credit unions should be looking at a boost in profitability over two to three years.

If despite best efforts the branch still isn't working and there is no other option left but to close, DEI Strategic Planner Mike King says to be sure to soften the blow.

"Give the members a significant amount of advance notice and let them know that the facility isn't closing but relocating to better serve their financial needs," said King. "You want to give them at least a few months notice and put your best foot forward. If you are getting out of a lease and building a new branch, then focus on creating excitement about the construction of the new branch by posting a rendering of it in the lobby or in the newsletters. You want to continue to build a good rapport with members."

Sometimes even though a branch is doing well it may be in the credit union's best interest to sell. That is what happened to San Diego-based Financial 21 Community Credit Union.

After serving members living and working in the downtown area, in late 2005, the credit union successfully negotiated the sale of its downtown branch and corporate headquarters property to Skandia Construction Services, Inc.

"They approached us to sell in November 2004 and it wasn't on our list of things to do or even consider," said Financial 21 CCU President/CEO Gene Roberts. "When we considered the sale offer, our main concern was how it would benefit our members so we asked for a few things in the negotiation process. The fact that our branch and corporate offices would remain at its current downtown address was a big positive."

As the decision to sell became evident, the credit union took its time to do research from having its own appraisal done of the property to informally speaking with a few real estate brokers to make sure the offer was in line with other properties in the downtown area. "We negotiated ourselves--we knew what we'd need and want and didn't need to retain anyone else," said Roberts. "We got quite a good agreement in place with them." For some four years the downtown San Diego skyline has been under an expansive redevelopment plan to meet the needs of an increasing number of individuals wanting to not only work, but also live in the city. The sale of Financial 21 CCU's property is part of an entire block being redeveloped by Skandia to include approximately 400 condominiums. Upon completion of the project, the branch and corporate facilities will occupy the first three floors of a new 21-story high-rise building.

"We kept going back and forth but we started looking three years down the road. Our building was already 26 years old and it is possible that at some point down the road with the redevelopment going on it could've been condemned. They made it easy for us to sell because it basically cost us nothing," said Roberts. "Looking at the sale of our property and cost of the new facilities in the condo turned out to basically be a wash and when all is said and done we'll be in a brand new facility with a higher profile in San Diego." As part of the deal, the development firm will also cover the credit union's moving expenses and temporary quarters located on the same block to ensure service to members will not be interrupted. The sale also provides significant business opportunities for Financial 21 CCU's mortgage company affiliate, which will be the preferred lender for the condominium buyers.

Escrow is scheduled to close during the first quarter of 2007 and members have been alerted via the annual report and newsletters. While still in the planning stages, the new facility will have a retail feel. Roberts says the sale process has been an educational one with a few lessons learned along the way.

"When someone comes knocking on your door to buy property they may not be willing to pay more than the property appraises for but there are other considerations or 'perks' they may be willing to include to convince you to sell," said Roberts. "The initial reaction was to wait and we may get more money down the road from someone else but we weren't sure if we'd get the same consideration as this developer and for us it's a great deal." --mdigiovanni@cutimes.com

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Credit Union Branches: Knowing When to Fold, Sell or Raise Awareness

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