For some banks, brick-and-mortar branch planning—though cautious—continues

By Katie Kuehner-Hebert

Even as community banks continue to launch the latest online and mobile technologies, opening new brick-and-mortar branches still remains a big part of the retail strategy for many community banks.

Take North Jersey Community Bank in Englewood Cliffs, N.J. Founded in 2005, the $687 million-asset community bank opened its eighth branch last July. It also has plans to open more to expand its footprint within the greater New York City metropolitan area.

“While the electronic delivery method certainly is reducing the need for branches, it doesn’t mean that branches are going away,” says Frank Sorrentino III, North Jersey Community Bank’s chairman and CEO. “We still need a physical place for transactions to occur. Customers still want to come in and get help from the local branch manager. They want to see their banker face-to-face.”

However, North Jersey Community Bank will likely slow its pace of branching, and as such, the placement of its branches will become even more critical, Sorrentino says. Any new branches will likely serve a wider market, say an entire county instead of an individual town. North Jersey Community may also open branches in New York City or in other parts of the city.

“We’re primarily a commercial business-oriented bank … and we have our branches where the businesses are located and where the business owners live,” he says. “The branch is also acting as a marketing tool, because business owners want to know the bank is in their market.”

The $1.5 billion-asset Green Bank in Houston has been on a new-facilities spree since its name and management changed in September 2007, expanding from two to 12 branches in Houston, Dallas and Austin. Four of those expansions occurred through acquisitions and four through organic growth. Focusing on metro Texas markets, Green Bank is also interested in the Fort Worth and San Antonio markets, says Geoff Greenwade, the bank’s CEO.

“You can’t get by with only virtual branches,” Greenwade says. “That doesn’t work in banking—it only limits the types of products and services that you can deliver.”

While Green Bank will launch online banking this year, it will be limited to offering CDs, money market accounts and savings accounts, while the community bank will use traditional branches to capture certain types of checking accounts, treasury management services, business loans and more complicated consumer loans, like jumbo mortgages.

“At some point, bankers have to be involved in that process,” Greenwade says. “You can’t go through the Internet or phone—there needs to be some face-time involved. So if you’re going to have bankers, you’re going to need to have offices to put them in, and you need to give them support.”

However, the look of branches will continue to change dramatically, in large part because of the alternative technologies, Greenwade says. Square footage is far less than the historical 4,000- to 5,000-square-foot stand-alone branch, and many branches are placed in retail strip centers with higher visibility but without drive-up service. The need for teller lines will also lessen, as the branch will likely be staffed by more business development officers.

The $176 million-asset First Florida Bank in Destin, Fla., is also branching out after it, too, was renamed in 2006 under new management, says Ronny Clay, the bank’s president. But as First Florida is headquartered in the state’s “overbanked” Panhandle, the community bank is opening branches in more diverse markets, including a branch in a beach resort area and soon two additional branches in markets inhabited by retirees, small businesses, a high percentage of military personnel and a large labor force.

First Florida hopes to grow through branching to $300 million in assets in the near future as well as through online and mobile banking, Clay says. “Our branching philosophy is based on the premise that those who reside in small communities continue to desire a bank that caters to their needs and a facility where they can bank face to face. We believe that banking in small communities will continue to see this type of customer for some time to come.”