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The Journal Gazette

  • Photos by Samuel Hoffman | The Journal Gazette There are no teller lines at First Federal Bank at 9909 Illinois Road. Customers go straight to a desk to conduct their business as banks try to better meet customer needs.

  • In the digital age, banks find that customers still want a brick-and-mortar location for certain transactions, including mortgage loans.

Wednesday, December 02, 2015 7:35 am

Banks build branch presence

Sherry Slater The Journal Gazette

With direct deposit, online bill payment and mobile deposit apps all increasingly common, about the only thing a bank account holder doesn’t really need is a bank branch.

Even so, surveys continue to show that certain customers believe the best place to accomplish certain tasks is in a brick-and-mortar building.

That fact is forcing bankers across northeast Indiana and northwest Ohio to carefully consider the business case for building branches.

Some banks and credit unions with an established regional presence have channeled millions of dollars into new locations and branch upgrades in recent years. 

But banks new to the area, including Merrillville-based Centier Bank, Cincinnati-based First Financial Bank and Defiance, Ohio-based First Federal Bank of the Midwest, are having a harder time justifying the expense of blanketing the city in branches. 

South Bend-based 1st Source Bank invested $8 million in the local marketplace last year, spending $4 million to build two branches and $4 million to extensively remodel six existing Fort Wayne branches. 

3Rivers Federal Credit Union has invested $20 million in branches and its Northland campus in the past three years, spokeswoman Melissa Shaw said. The Fort Wayne-based nonprofit spent $15 million expanding and remodeling its headquarters off Lima Road and built branches in Auburn and Bluffton. 

And Warsaw-based Lake City Bank has announced plans to put a branch in leased space in the Ash Skyline Plaza, the $98â ¯million Ash Brokerage headquarters project downtown.  

The investment can be justified. Research shows that some customers – spanning age and income categories – prefer to perform certain transactions inside a bank branch. 

But research also points to an increasing dependence on other ways of banking. For example, Novantas Inc. subtitled its 2014 customer survey, "The Growing Opportunity for Thin Branch Strategies."

The New York research and consulting firm found that 39 percent of consumers are what it calls "thin branch-ready." Those are people "who rarely use branches but are nonetheless attached to them."

Researchers say that’s a dramatic increase from 25 percent in a survey two years ago. The data are based on 4,125 scientifically chosen survey participants.

The Novantas survey, which was released in December, also found that while customers are increasingly willing to deposit funds at ATMs or by mobile apps, more than one-third prefer to walk into a branch when they need to resolve a problem.

Consumers’ favorite place to conduct banking business is online, according to a survey conducted this year by the American Bankers Association. Almost one-third – 31 percent – of respondents said they prefer Internet banking. 

But visiting a branch was second at 21 percent. The survey of 1,000 people was conducted in August and has an error margin of 3 percentage points.

Nessa Feddis, the association’s senior vice president, said people use various methods for banking, including ATMs and apps on mobile devices. And branches are an important part of that mix.

"When people are conducting a complex transition like opening an account or applying for a home or business loan, they often prefer to do it in person," she said in a statement. "We’re seeing a branch renaissance in some areas, with many banks transforming their branches to become more efficient and customer-friendly."

More Centier branches planned

Centier Bank entered the Fort Wayne market with a loan production office in early 2008.

The leased space at 9921 Dupont Circle Drive West, Suite 110, has a branch charter, which allows it to provide limited teller service aimed primarily at business banking customers, said Michael Schrage, Centier’s president and CEO.  

Centier’s focus so far in Fort Wayne has been on business and mortgage lending. But more branches are in the works.

Schrage projected the bank will add to its current 51 locations with two to five more in Allen County in the next five years.

Although Centier offers online bill-paying, mobile deposits and online account openings, many customers prefer to visit a branch to open new accounts and resolve issues, he said.

"There is less traffic activity, but not dramatically less," he said. "It is a social experience for them to come by the bank and visit a little bit on their way to other activities."

Centier, which has $2.6 billion in assets, bills itself as the largest privately held bank in Indiana. For comparison, Indianapolis-based Salin Bank, which is also privately held, has about $750 million in assets. Evansville-based Old National Bank has $11.2 billion in assets but is publicly traded.

Building a bank branch typically costs $2 million to $2.5 million, including the real estate, technology and furnishings. But Schrage has found a way to cut that cost by half – or more. 

Centier’s strategy centers on acquiring branch buildings that larger, regional banks are closing as they consolidate locations.

That cost is significantly lower than building new, he said. The bank limits its interest to properties listed at less than $1 million and is sometimes able to buy one for as little as $200,000, he said.

Centier recently used that approach to expand its presence in Elkhart and Carmel.

‘Growth market’ for First Federal

First Federal recently opened its second local branch, at 9909 Illinois Road, and has plans for a third location that could open next year near St. Joe Center Road and Meijer Drive. 

Philip Bundy, the bank’s Fort Wayne market executive, said First Federal has been doing business here for 15 years and opened its first office here seven years ago.

"We’re showing a commitment to the community by investing in various locations and hiring staff for those locations," he said. "Fort Wayne is a growth market for us."

The Defiance-based bank is stoking that growth with bricks and mortar, including its first local branch at 1595 W. Dupont Road.

"We really see that physical branches are always going to be needed," Bundy said. "We actually still do get a lot of walk-in transactions."

While First Federal concentrates on Fort Wayne’s suburbs, competitor First Financial is focused on the heart of downtown.

First Financial Bank is poised to open a first-floor branch and sixth-floor offices in what was formerly known as the Anthony Wayne Building at Berry and Clinton streets. The location is across the street from the Allen County Courthouse and Citizens Square, where city and county employees have offices.

The lending officers were scheduled to move last week, and the branch is on pace to open by March 31.

What happens next is uncertain.

Rob Slusser, First Financial’s northeast Indiana market president, is soliciting feedback from customers and prospective customers about how the bank can meet their wants and needs.

Bank officials haven’t yet decided how many branches it will build in Fort Wayne or where they will be, he said. But, Slusser added, they are scouting locations.

As they weigh the value proposition of branches, bankers don’t have a set formula – one branch for every so much in loans or deposits. At least, Slusser doesn’t know of any such formula.

But he’s well aware of customers’ embrace of technology, the kinds of technology that makes branches unnecessary.

"We certainly look at branches as just one delivery channel in today’s banking world," Slusser said. "That’s the challenge right now – getting the right number (of branches) to serve the clients and meet their needs."