Branch banking holds its own

Bank of Colorado president Shawn Osthoff admits that it might raise a few eyebrows to be adding a new physical bank branch, even as more and more customers are shifting to electronic banking.

But Bank of Colorado is doing just that, with a bricks-and-mortar location planned for west Greeley — and having opened a new branch in Loveland about a year and a half ago.

Despite those additions, “We don’t intend on opening very many bricks-and-mortar branches,” Osthoff said. “The number of physical visits to a branch are down, and people are using our online products more every day. The reasons for entering a branch are fewer and fewer in between.”

SPONSORED CONTENT

Empowering communities

Rocky Mountain Health Plans (RMHP), part of the UnitedHealthcare family, has pledged its commitment to uplift these communities through substantial investments in organizations addressing the distinct needs of our communities.

Nonetheless, bricks-and-mortar locations continue to play a role in serving customers, Osthoff said, especially for things such as closings of commercial or residential real estate loans.

“Our customers need and deserve both options,” Osthoff said, referring to physical locations and electronic banking.

Other bankers seem to agree. A recent study by the Federal Deposit Insurance Corp., titled “Brick-and-Mortar Banking Remains Prevalent in an Increasingly Virtual World,” concluded that “New technologies have certainly created convenient new ways for bank customers to conduct business, yet there is little evidence that these new channels have done much to replace traditional bricks-and-mortar offices where banking relationships are built.

“Convenient, online services are here to stay, but as long as personal service and relationships remain important, bankers and their customers will likely continue to do business face-to-face.”

Osthoff said that Bank of Colorado, which enjoys the largest deposits in Weld County, needed a second branch in Greeley, even as it recently remodeled its location at 3459 W. 20th St.

Bank of Colorado operates 41 branches in Colorado, not counting the new Greeley location.

Many of the additional branches for financial institutions in the Boulder Valley and Northern Colorado have come from existing institutions — such as Bank of Colorado — seeking to better serve their customers. Others, such as Boulder-based Elevations Credit Union, have expanded into new markets. Elevations opened its first branch in Fort Collins in December 2014 and intends to open two or three additional locations in the city.

The credit union also received approval in January to expand into Denver, Weld and Jefferson counties. CEO Gerry Agnes said that bricks-and-mortar offices are a key part of the credit union’s expansion strategy, describing the “network effect” of having multiple branches within a community.

“When we put in our second branch (in Fort Collins), our size will more than double because of the network effect,” he said. “If you have two or three or four branches in a market, the traction that you get is not linear, it’s exponential.”

Elevations seeks to expand in markets adjacent to its current branches. A merger in 2010 with Longs Peak Credit Union in Loveland helped close the gap between branches in Boulder County and Fort Collins, leading to the decision to enter the Fort Collins market.

But adding branches in new markets isn’t the only expansion planned for Elevations, which also is eyeing additional locations in Boulder and Broomfield counties to enhance that “network effect.”

Bankers expanding with bricks-and-mortar locations are doing so quite differently than they would have several years ago. Osthoff said that new branches today are far smaller than they would have been five or six years ago, perhaps 2,500 or 3,500 square feet, vs. up to 6,000 square feet years ago.

Elevations’ Agnes agreed. Not only are the credit union’s new branches far smaller than in years past, but they also have a much different purpose, what Elevations has dubbed “Branch 2.0.” That model reflects the shift in what is actually done inside a branch: fewer transactions and more consultative services.

“Very little of the real estate at the branch is dedicated to transaction processing,” Agnes said, with most space devoted to services such as wealth management, mortgage loans, small-business banking, opening of consumer accounts, etc.

Agnes said that about 80 percent of transactions at Elevations are accomplished electronically, through the website, app and other means.

Just as Elevations has expanded into Larimer County, other institutions have ventured into Boulder County. Sunflower Bank of Salina, Kan., opened its first Colorado branch in Longmont in 2013, and soon will open its first branch in Boulder. Other new entrants to Boulder include Bank of America and Community Banks of Colorado, which operates a loan-production office in the city, with plans for a branch.

Overall, the number of branch locations in Boulder, Broomfield, Larimer and Weld counties has held steady over a period of years. An analysis by SNL Financial, conducted for BizWest, found only modest declines in overall branch numbers — the numbers do not count credit-union locations — since 2012.

That data is borne out by the FDIC.

“Banking offices remain prevalent. The total per capita density of banking offices in 2014 was higher than in any year before 1977, and the density of banking offices in rural and micropolitan counties has declined very little over the past 25 years,” the FDIC report stated.

“This analysis shows that physical offices remain a vital channel through which FDIC-insured institutions deliver financial services to their customers.”

Christopher Wood can be reached at 303-630-1942, 970-232-3133 or cwood@bizwestmedia.com.