By MYRIAM DI GIOVANNI CU Times Senior Staff Reporter KNOXVILLE, Tenn. — When it comes to purchasing a lot for the next branch the golden rule of location, location, location gets a bit more complicated for a community credit union. For K-25 Federal Credit Union, which decided some three years ago that adopting a community charter was its best option for continued growth, selecting new branch sites has been more challenging than any personal real estate investment. Now able to serve eight counties, including the metro area in Knoxville and three underserved areas, made selection even more important, said K-25 FCU President/CEO Wayne Hope. "This is a highly competitive market," said Hope. "In addition to the big bankers we've got three of the largest top 10 credit unions here so we were reluctant to dive head first into a retail area already well populated by the competition." The credit union tapped Atlanta-based design/build firm LEVEL5 for a strategic approach to researching where it would be best to build. "It is a significant investment and we needed an objective analysis," said Hope. "If we tried to do this ourselves we'd have so many preconceived notions about areas we think we should be in that may not necessarily be based on detailed demographic studies." Working with the credit union, LEVEL5 delivered a comprehensive report of four counties both in markets K-25 FCU was already in or should consider going into, taking into account not just future growth areas, but also a look at the total market share. For example, if an area had great future growth potential and there were only five competitors there, but the top two already had over 50% of the market share, then Hope says it wasn't really the ideal fit for the credit union. "We wanted an area that had a lot of growth that was not very banked," said Hope. "It's more attractive for us to be first in the area than just joining at the tail-end especially as a community credit union. In general people are still not as familiar with credit unions so without a relationship with a SEG or business partners for introduction, as a community credit union in an established area makes it even more challenging to reach members." Hope says the research analysis process was an educational and worthwhile experience that not only helped identify an area that would bring profitability to a new branch in a short period of time, but also helped the credit union save money in the property negotiation stage. After finding the ideal site to build a new 5,000 square-foot facility, the credit union was able to negotiate the purchase price of the parcel of land anonymously through a broker. "The secrecy is better for negotiation since most sellers try to mark up the price once they know a financial institution is involved," said Hope. "Unfortunately they have this perception that financial institutions have 'unlimited funds' to pay top dollar, not recognizing that everyone has a budget." Ironically the final site selected was one that the credit union had briefly looked at before tapping LEVEL5, but initially dismissed it since there weren't many competitors there. Hope says the research revealed it to be ideal since it will give K-25 FCU the visibility it needs and is not only near three of West Knoxville's largest older neighborhoods, but also near an area that is slated for some of the largest new developments in the next five years. With a focus on member convenience and creating a unique branch experience, the new facility will feature dialogue towers and have more of a retail feel. Hope says the branch is truly a collaborative effort with credit union executives providing input on the design and flow. He adds that, with an emphasis on removing barriers, the interior will have an open feel where employees and members will work together in building deeper relationships. "Our greatest lesson learned is that the old idea of just using the criteria of exclusively building where people live or work goes out the door with a community credit union," said Hope. "There are so many different factors involved you need to do the research and have a comprehensive branch plan–sometimes it's not in your best interest to be where everyone else is currently located." –[email protected]