CINCINNATI -- Design and build firm DEI may be redefining the de novo 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 Planning Vice President Arp Trivedi. "The methodology developed by Mike King and I is a sound new approach to determining which markets to enter and provides potential areas for credit unions to consider to be competitive against banks or just to locate in a growing economic area that they may not have otherwise considered."

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

From a competitive perspective, the firm considers total deposits, deposit growth and population per branch as components, among others, to determine a competitive ranking (CEI factor). The two aggregate indices are then blended together to determine a de novo ranking. Trivedi said the same logic can be used at other levels of geography, including ZIP code, and potentially, in the future, census tract and block group.

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

--mdigiovanni@cutimes.com

Instant Insights /

Design and Build Firm DEI Finds New Opportunities in Classic Markets

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