Even as customers embrace and expect digital banking services, community bank branches are not just surviving but thriving. We hear from five banks betting on branches.
By William Atkinson
There’s no doubt that the role of brick and mortar is changing in the community banking industry. But Independent Banker’s 2020 Community Bank CEO Outlook survey revealed that, even as many national and regional banks are closing branches, the vast majority of community banks are looking to maintain or grow their branch networks.
But these new branches don’t necessarily look like what you’d expect. Many community banks are reinventing or repurposing their offices to meet the changing needs of their customers and communities, as well as of the banks themselves. As a result, community banks and their branches remain vital pieces of the surrounding communities. In fact, Noah Wilcox, ICBA’s new chairman, describes the community bank branch as its community’s “front porch.”
Here, we showcase how several community banks are keeping new branches at the heart of their communities.
D.L. Evans Bank: Moving in when megabanks leave
One community bank with an aggressive branch-opening strategy is $1.8 billion-asset D.L. Evans Bank in Burley, Idaho. “Several of the large banks, especially Wells Fargo, have been closing branches around here left and right in Idaho and Utah,” says John V. Evans Jr., president and CEO. “This requires customers of these banks to have to travel further to visit other branches.”
D.L. Evans Bank sees an opportunity to grow in the displacement of the customers of these other banks. “They want convenience, and we can provide that convenience by opening new branches in those areas,” Evans says.
In fact, D.L. Evans experienced record growth in 2019, growing by almost $220 million in assets. It has opened three new branches in Idaho and is planning two or three more in 2020. “While we are located in southern Idaho and have about 31 branches here, we will also be expanding into Utah,” Evans says. “In fact, we have already opened two branches there and ended up experiencing our biggest growth in our 115-year history as a result of continued growth and branch expansion, including the bank’s expansion into northern Utah.”
“[We had] our biggest growth in our 115-year history as a result of continued growth and branch expansion.”
—John V. Evans Jr., D.L. Evans Bank
While mobile banking is table stakes for most customers, D.L. Evans Bank believes they still want to be able to meet bankers in person at local branches, so its new branches reflect this opportunity for personal connection. “In our new branch near Sun Valley [Idaho], for example, we have installed a small coffee shop, so that customers can sit, have a cup of coffee and read the paper,” Evans says.
He acknowledges that teller transactions are decreasing quickly—a fact the bank has woven into its branch strategy. “We are hardly getting people coming in the door for teller transactions,” he says. “They are using their cards to do their business. As a result, our new branches have fewer teller lines, simply because the walk-in traffic just is not there anymore. For example, our new branches may just have two teller stations instead of four or five. We still have drive-thrus, but even those are being used significantly less often by customers.”
Today, D.L. Evans Bank’s branches are aimed at customers and prospects who want to visit for purposes beyond basic transactions, such as discussing a loan. The branches are also home base for community bank personnel who are tasked with getting to know local business owners and other business prospects in the area.
To market its new branches, D.L. Evans Bank still uses print, television and radio advertising. It also does some digital advertising. “However, our main effort is that we like to get involved in all of the community activities and get our people out into the communities to meet people, such as joining the local Rotary,” Evans says.
Eclipse Bank: A measured branch strategy
Another community bank seeing opportunities in the wake of national and regional bank branch closures is $175 million-asset Eclipse Bank in Louisville, Ky. “What we see with larger banks is that, as trends change, many times they find themselves too concentrated with branches in certain areas, so they get involved in realignment, which may mean closing branches,” says Andrew Pyles, president and CEO. “For example, in one market, if they had 30 branches, they may go down to 25, but then go into a new market and add four or five new branches.”
In addition, according to Pyles, a lot of smaller banks are selling or closing their doors. “In our market, I think we have lost three locally based banks in the last couple of years, which creates an opening for a bank like ours to fill that void,” he says.
Eclipse Bank looks for opportunities to open new branches when the time is right, based on its community banking model: Once it reaches a certain asset size and scale, it feels that the time is right to open a new branch.
“In terms of the features we want in our new branches, obviously [digital channels are] big these days,” Pyles says. “Still, a lot of people will use technology even if it is in a brick and mortar location.”
He notes that in the past, it was important to have branches clustered near one another to meet the numerous transactional needs of customers. “These days, though, with the increase of digital, this need is decreasing,” he says. “But customers are wanting brick and mortar locations in order to meet with our people for consultative and informational needs, such as applying for loans.”
“Customers are wanting brick and mortar locations in order to meet with our people for consultative and informational needs, such as applying for loans.”
—Andrew Pyles, Eclipse Bank
Heartland Bank: Aiming for local growth
Heartland Bank in Gowrie, Iowa, is always looking for opportunities to open new branches, either via acquisitions or de novos, says president and CEO Kevin Black.
“However, we are finding that acquisitions are getting fairly expensive,” he says, “so if we can find a market that we feel is growing and is fairly close—less than two hours away from our main offices—we will take a serious look at it. In sum, we are looking for almost any opportunity that we can find in order to keep [growing].”
As is the case with other banks, the $155 million-asset community bank is finding that teller transactions are decreasing, which leads to the opportunity for new branches with smaller footprints. “Technology is really driving banking today, so we focus on that in our new branches,” Black says. “In addition, the adoption of mobile banking continues to grow rapidly. In fact, what really drives the success of a new branch for us is our employees. You need good employees with the proper skill sets.”
In terms of advertising and marketing its new branches, Heartland Bank continues to use traditional methods but is increasing its use of cost-effective social media platforms. “We also find that having employees involved in the community, such as participating in community groups, helps get the word out,” Black says. “In fact, this may actually be where we get our best advertising. The reason is that we tend to be active in smaller communities, and the personal touch is what leads to success.”
Legence Bank: Efficiency first
While there are plenty of community banks that are opening brand new branches, some are consolidating existing older branches and replacing them with new state-of-the-art branches that provide more features and benefits to customers.
One of these is $480 million-asset Legence Bank in Eldorado, Ill. In the summer of 2018, Legence purchased eight branches in southern Illinois from another community bank. Two of these branches were located in Marion, Ill. “One location was a rental facility, and the other seemed to be in an inferior location and wasn’t up to speed with what we consider to be modern banking,” says Kevin Beckemeyer, president and CEO.
The bank decided to consolidate the office into a single new location for three reasons. First, it wanted to gain the efficiencies of combining two branches into one. Second, it wanted to build a new branch that had the latest technologies and other service features. And third, it wanted to make sure that the branch was located in a more desirable location—a high-traffic area of the city.
So, what does the new branch look like? “We wanted our new branch to be warm and inviting to customers,” Beckemeyer says. While the branch has a traditional drive-thru, ATMs and teller windows, it also features two “pods” for cash dispensing and other basic transactions.
Beckemeyer says one advantage of this arrangement is that customers can complete their transactions more quickly. “Then, if a customer is interested,” he says, “the teller can come from behind the pod and take the customer to a different location in the branch to meet with a lender, an investment advisor or other business partner.”
The Marion branch offers mortgage and other consumer lending, SBA lending, commercial lending and ag lending, as well as investment services.
“We offer free coffee at all of our branches, but the coffee bar in our new Marion branch is unique in that it is in a special area that is set aside for people to have a comfortable space,” says Tricia Johnson, Legence Bank’s vice president of marketing and communications. “It also allows members of our own team to sit down and have informal conversations.
“We also have a new digital sign right at the coffee bar,” she adds, “which provides opportunities for us to partner with local philanthropic organizations and businesses and promote what they are doing in the community.”
The Marion branch gets the word out about products, services and promotions through displays inside and outside the building. “For example, we have a very large digital sign outside,” Johnson says. “It can do a lot more than just scroll a few words. We are able to show large images, text and ads. Inside, we have a digital sign behind the teller pods, which allows us to feature various ads.”
There are video screens in the drive-thru area, so while customers are waiting on the drive-thru tellers to complete their transactions for them, they can learn about some of the community bank’s offerings. “The idea is to pique their interest in some products and services we offer that they may not have known about,” Johnson says.
Outside of the branch, Legence Bank’s marketing strategy includes newspaper, TV, radio and social media. “In our area, radio is still a very popular platform to reach people,” Johnson says.
ONB Bank: A logical footprint expansion
With assets of $120 million, ONB Bank in Rochester, Minn., is another community bank that sought opportunities to grow via new branches. “We have just opened a new branch in Stewartville, a town about 10 miles south of our headquarters,” says Brad Becker, president and CEO. Prior to the Stewartville location, ONB Bank had two other locations: its headquarters in Rochester and one branch facility in the same city.
The community bank looked at a number of factors when deciding to expand to Stewartville. For one, Stewartville is a growing community with a strong local employment base. Another factor was that a large national bank had just closed a branch there. “In addition, several of our current staff grew up in Stewartville and still live there,” Becker says. ONB Bank also had the opportunity to hire someone from that town to manage the branch, and about 10 of the bank’s shareholders live there. Last but not least, about 20 years ago, when Becker, a former field examiner for the FDIC, was getting his MBA at Winona State University, he wrote a paper about the potential of opening a new bank in Stewartville. He saw it as a growing community with a strong employment base in need of a locally owned bank. “We are now doing something I actually started thinking about 20 years ago,” he says.
ONB Bank opened a temporary branch in Stewartville in February 2019 and broke ground for the permanent location in August 2019. Even before that, employees at the temporary location were getting involved in community activities, such as the United Way Running Start for School drive.
The new permanent ONB Bank branch opened in December 2019. While this new branch features technology such as mobile banking and remote deposit, Becker is committed to the idea that personal relationships are what make branches successful. “This is especially key, since many of our own people live there,” he says. As a result, he plans on using what he calls the “good old-fashioned habit of knocking on doors and getting to know people.”
William Atkinson is a writer in Illinois.