"For the past 30 to 35 years there is not a retail business in the United States that doesn't use modeling," said Winter. "Target, Wal-Mart, they all use it to discover where their optimum locations were. The banking and credit union industry started getting into modeling about 10 years ago."

He said that today's modeling is very sophisticated and can predict the value of a site. The methodology relies on observation, cataloguing the experience based on factors that drive the model, mapping and analysis of the demographics, interviewing key influencers such as city planners, scoring the sites and developing a plan that reflects the culture of the credit union with site potential.

For example, one factor, the population density helps in that generally branches that do best have high visibility traffic.

"Modeling is half art and half science–the part based on mathematics is that each factor carries a score and adding up the points that provides a score that converts to a letter grade–most are looking for the 'A' site–which converts in turn the exact amount of deposits expected within a spread of five years. For example, in a metropolitan area it's about $30 million to $50 million in deposits in five years," said Winter. "Most credit unions don't want below a 'B' site because you get into marginal profitability. A study four years ago found that a branch that brings in less than $12 million in deposits in five years may not only be in a troubled location but may never be profitable, today that number is more like $20 million."

The art of site selection Winter said comes from the more human aspect. So while the modeling can project down to the corner that a branch should be placed, there is still a need to physically go canvas the area.

"You have to get out and drive every single mile of the marketplace because the computer can't do everything you need the visual data," said Winter. "You'll discover basics like is the property available or what is located there? It may already belong to another bank or credit union."

He said some of the greatest challenges to branching are over banking, the number of sites are shrinking, the regionalization of retail–smaller towns are dying, lack of skilled negotiators in real estate and most importantly there has to be a plan that is proactive rather than reactive.

"Over banking is a reality today and regardless of where you go will have that. Banks, credit unions, retailers are all competing for the same sites, which makes location even more critical because there is less margin for error," said Winter. "You've got to be proactive and constantly be actively looking for your next or future locations–don't just go to the latest hot locations. Research where the future hot spot will be that will help meet your specific credit union's needs for expansion."

He added that without the right spot credit unions won't have a chance to demonstrate their preferred service.

"Take your time, use the technology at your disposal the results of having the right location are not exaggerations, it's been well documented," said Winter. "Go about site selection the right way and have confidence in the decision not because of a gut feeling but based on a science."

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