CINCINNATI -- Design and build firm DEI may be redefining the denovo strategy, particularly for community credit unions.

"I hesitate using the word 'de novo' since it indicates a 'new'market rather than new opportunities," said DEI Strategic PlanningVice President Arp Trivedi. "The methodology developed by Mike Kingand I is a sound new approach to determining which markets to enterand provides potential areas for credit unions to consider to becompetitive against banks or just to locate in a growing economicarea that they may not have otherwise considered."

To that end, DEI has developed the top 100 markets in terms ofdemographic and competitive potential (just 50 are listed below).The model is built using two broad categories of data--demographicand competitive--and within each category there are attributes thatDEI considers for each geography, in this case the countygeography. Trivedi said there are 3,141 counties in the U.S., andDEI used a total of 117,000 branches in the model, aggregated theirdeposits by county, and ran the model.
In the model, from a demographic perspective, DEI uses items likepopulation, absolute population growth, median household income,businesses and other attributes to understand the potential of agiven market (DEI factor). Some attributes are given greater weightthan others. For example Los Angeles County ranked No. 1 in the DEIfactor (demographic evaluation index) primarily because of its 10million person population.

From a competitive perspective, the firm considers totaldeposits, deposit growth and population per branch as components,among others, to determine a competitive ranking (CEI factor). Thetwo aggregate indices are then blended together to determine a denovo ranking. Trivedi said the same logic can be used at otherlevels of geography, including ZIP code, and potentially, in thefuture, census tract and block group.

"It is about helping credit unions better position themselves ina given marketplace and assist in overall strategic planning," saidTrivedi. "The takeaway from this is to apply to your specificmarket--where you need to be, when you need to be there, what typeof entry is needed, the costs involved and the financial impact forthe overall franchise of your specific credit union."

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