Call it the trendsetter for the credit union industry.
Call it a glorified billboard company with 53 branches and counting.
As long as that phone is ringing and a growing number of people are walking through the doors to open new accounts, Lower Allen Township-based Members 1st Federal Credit Union is not going to stop investing in real estate.
"It encourages people to join us. It's a visibility issue," Bob Marquette, the credit union's president and CEO, said of Members 1st's continued pursuit of new branch offices across Central Pennsylvania.
While the state average for credit union branches is two (see "Branch approach in Pa.," page 4), Members 1st — already the leader in the clubhouse — is planning to open five more this year in Cumberland and Lancaster counties.
"We fully intend to grow and grow as quickly, if not quicker, than we have been growing," Marquette said.
He would not say how much the credit union budgets for annual branch growth. "It depends on a variety of factors," he said, which includes everything from location to the size of the building and staffing.
Members 1st uses three branch prototypes. Which one is built depends on the market, proximity of other branches, and what products and services exist at those established sites, Marquette said.
"We are determined to add branches and push out the market," Marquette said. That includes financial services in seven counties.
That branch-first mentality so often associated with banks — some of which, including PNC Financial Services Group, are now rethinking that traditional model — continues to pay off for Members 1st. It added more than 41,500 accounts in 2012 and nearly 36,000 in 2011 compared with previous years, according to financial statements submitted to the National Credit Union Administration.
Pennsylvania's No. 3 credit union is growing those accounts by a much higher margin compared with the Pennsylvania State Employees Credit Union, or PSECU, which is the second-largest credit union. PSECU added more than 16,000 accounts in 2012 and about 9,500 in 2011, according to its financial statements.
PSECU president and CEO Greg Smith argues the cost structure associated with the branch-heavy model isn't worth it for his credit union, especially in today's digital age.
The Harrisburg-based credit union, which has a centralized operation in one main facility, was one of the first to deploy home-banking and mobile services. It relies on technology and automation to serve the entire state.
"PSECU wouldn't have any advantage in building those branches," Smith said. "If you have a cost structure that's the same as everyone else, you're probably going to end up with fees just like everyone else."
Marquette admits Members 1st is not cutting edge when it comes to technology and mobile banking.
"We like to see some validation that predicted trends are, in fact, occurring," Marquette said. "We have not seen that."
If more of the credit union's new accounts were coming from online, Members 1st would have to reconsider its investment in branches, he said.
"We're hoping branches acquire members, and we then move them to electronic (services)," he said. "We see a multichannel strategy working. If the focus is growing the customer base, our model is far superior."
Mobile banking is the table stakes today, Smith said.
"The problem for Members 1st is they have to play in both spaces," he said, which adds costs to members (see "Tale of the tape: No. 2 versus No. 3," this page).
Members 1st might get the new members and additional accounts on a higher scale — including commercial accounts — because of its "billboards," Smith said, referring to the branches.
But because it does not invest much in real estate — the exception being its $71 million headquarters slated to be done this summer in Susquehanna Township — PSECU can offer annual member rewards, Smith said.
Earlier this year, PSECU issued a special $10 million dividend labeled a relationship reward for members who stuck with it and helped the member-owned cooperative prosper during the recession. Eligible members received at least $10.
"We have totally different business models," Marquette said of PSECU. "There is plenty of business for both of us."
The branch growth at Members 1st has bolstered internal growth in recent years, officials said.
The credit union has its 55,000-square-foot headquarters at 5000 Louise Drive and an adjacent 47,000-square-foot office.
About 370 people work in those two buildings. Officials said they believe they should have enough space in the short term.
"We think we're set for five years, hopefully," Marquette said. "If we need more space, that's a good thing."
He said he believes the credit union likely would look at building between the two office properties. No plans have been made.
"We'll see what comes available," he said. "I don't think we would totally move out of here and into one (new) building."
Members 1st has been in its current headquarters in the Rossmoyne Business Center since 1997. It bought the neighboring site in 2007.
"I see us developing a campus approach," Marquette added. "There are buildings here in this business park. If one came available nearby and we had growing pains, we might consider buying another building."
Contrary to popular belief on growth in online and mobile banking options, Members 1st Federal Credit Union reported growth in branch transactions.
"We see additional delivery channels as additives, not as substitutions," said Bob Marquette,the credit union's president and CEO, referring to electronic banking. "People use all channels. They don't go from one to the other, exclusively, in general."
Members 1st is seeing growth in online services. Its model of building branches helps acquire new accounts, he said.
"The more branches they see, the more it underscores convenience," Marquette said. "Convenience is what people want. Once they join, we try to educate them about our electronic services."
Branch transactions by year
2009: 3.3 million*
2010: 3.5 million*
2011: 3.7 million*
2012: 3.9 million*
*Numbers include telebranch, or customer service support.
Source: Bob Marquette, president and CEO, Members 1st
Members 1st Federal Credit Union expects to open five branches this year, Executive Vice President George Nahodil said last month. The additions will bring its branch total to 58.
• 1299 South Market St., Elizabethtown
• 5211 Simpson Ferry Road, Mechanicsburg
• 2538 Willow Street Pike, Willow Street
• 814 W. High St., Carlisle
• 836 E. Main St., Ephrata
Source: Members 1st Federal Credit Union
With its branch growth, Lower Allen Township-based Members 1st is growing beyond its headquarters at 5000 Louise Drive and adding staff at its neighboring office building at 5020 Louise Drive.
The home building is 55,000 square feet and houses about 252 employees. The neighboring property has a 47,000-square-foot building that currently houses about 117 employees.
• Headquarters: 5000 Louise Drive, Mechanicsburg
• Adjacent support office: 5020 Louise Drive, Mechanicsburg