Community bankers here largely disagree with a recent national survey of their contemporaries that says 60 percent of such bankers believe there are too many branches in the markets they serve.


Even Kurt Gustavel, president and chief operating officer of Coeur dAlene-based Idaho Independent Bank, who agrees with the study, says operating in an over-branched market wont stop Idaho Independent from expanding more.


We are always on the lookout (for new branch locations), even in Kootenai County, says Gustavel. Even if the county is over branched, if the right opportunity from a strategy and execution standpoint comes along, we could open a new branch there.


Nearly 550 community bankers from across the nation participated in the survey that was sponsored by Unisys and Jack Henry & Associates Inc. The surveys results were released earlier this year at the American Bankers Associations National Conference for Community Bankers.


Jon Hippler, CEO of Coeur dAlene-based Mountain West Bank, says bankers in the national study might say their markets are over-branched, but even the big banks are aggressively expanding their branch networks.


Spokane-based Inland Northwest Bank, which operates 10 branches, including seven in Spokane, is looking for new branch sites, says Randy Fewel, its president and CEO.


Fewel says convenience is a key reason why customers choose a bank, and he agrees with other community bankers here, as well as those surveyed nationally, that branch expansion is the industrys best tool to build deposits.


During the interview, Fewel logged on to the Federal Deposit Insurance Corporation (FDIC) Web site to confirm his theory that there is room for more bank branches in Spokane and Kootenai counties.


It only takes about $10 million in deposits to make a new branch profitable, usually within 18 months to 24 months, he says. He divides the FDICs figure of $5.5 billion for total deposits in Spokane County banks by the 122 bank branches the FDIC reports are operating in Spokane County, and calculates that branches here have an average of $45.2 million in deposits.


Thats slightly less than the statewide average of $49.9 million per branch, a figure thats skewed by the Seattle market, where the average is $84.5 million, but shows theres still plenty of opportunity for growth, he says.


If $10 million in a branch will make a profit, and the state average is about $50 million, thats pretty good, Fewel says. He says the average Kootenai County bank branch has $36.8 million in deposits.


Steve Cocheo, executive editor of the American Bankers Associations ABA Banking Journal said this about the survey in a press release: Branching has become the ante that bankers must pay to demonstrate real interest in a customers market. He added, For community banks, there is no substitute for planting the flag in a new area.


Bob Daugherty, president and CEO of Spokane-based AmericanWest Bank, says he doesnt think the Inland Northwest is over-branched and adds that AmericanWest made a conscious choice about a year ago to expand into growth markets in North Idaho and Eastern Washington.


AmericanWest currently has 43 branches, with six more under construction. Its focus so far has been in Washington and Idaho, but its now moving into the Salt Lake City market, he says.


Daugherty says the b ank has adopted a strategy of building smaller neighborhood branches with lower overhead costs than the branches it previously built.


Now, I can build five smaller branches for what it cost to build one large branch five years ago, he says. New AmericanWest branches now average about 1,800 square feet in space, compared with older branches that had at least 3,500 square feet of space, he says.


Credit unions have opened many branches in recent years, too, although Jennifer Lehn, executive vice president of Spokane-based Numerica Credit Union, says credit unions are focused on just consumers, while banks focus on both consumers and businesses. Credit unions different focus affects site selections for new credit-union branches, as theyre targeted at where consumers work and live.


Although Numerica already has 12 branches, eight of them in Spokane and two in Coeur dAlene, We feel we are in a market that has a significant opportunity for growth, says Lehn. Branching is critical to growing membership.


She says Numerica is negotiating to buy two properties where it might open new branches, but declines to disclose the locations.


Hippler, of Mountain West, says the national studys argument that there are too many bank branches largely depends on what region, or even specific area within a region, is being evaluated. He says Mountain West takes the guesswork out of whether a proposed branch will be profitable at a given location by studying the location carefully.


Mountain West, currently with 22 branches and another one under construction near Boise, hires consultants who study demographic data within a two- to-five-mile radius of any proposed branch site, Hippler says. Information such as the age and income of residents there, the proximity and success of other banks, and other data are analyzed to determine if Mountain West can operate a branch there viably.


We are always on the lookout to expand, says Hippler, and with these vendors we feel confident that weve taken the risk out of what was previously a gut-level approach. Also, in contrast with AmericanWest, Hippler says Mountain West has developed a strategy of having fewer, but larger bank branches.


Jack Heath, president of Spokane-based Washington Trust Bank, says, There are a horrendous number of bank branches being built here, but I think it would be a huge mistake if banks dont continue to invest (in new branches).


Washington Trust has 35 branches in Washington and Idaho, and one in Utah. Fifteen of those branches are located in Spokane County, and Heath says the bank is considering opening two more branches here, one in Airway Heights and the other in the Indian Trail area.


John Wagner, F&M Bank president and chief operating officer, says he doesnt think that Spokane County, where F&M operates all of its 16 branches, is over-branched. F&M would consider new branches here if customers had a need, but, other than a possible branch replacement project, the bank has no immediate plans for expansion, says Wagner.


AmericanWests Daugherty says an alternative to opening new branches is to acquire branches, as AmericanWest did in May when it bought Pasco, Wash.-based Columbia Trust Bancorp.


Another way to expand deposits is the advent of whats called remote capture, in which business customers lease or buy equipment that allows them to scan checks they receive from customers and automatically transmit that information to their bank, depositing the funds in their accounts electronically, rather than having to drive to a branch to make a deposit in person.


Absolutely, remote capture increases deposits, says Washington Trusts Heath.


Gustavel says that in order to grow, some banks also have expanded the number of trust services they offer, and even have gotten into the business of selling insurance. Both tactics, he says, can boost deposits.


Banks are well aware of the competition they face from credit unions and big financial institutions, such as Merrill Lynch & Co. and Charles Schwab & Co., which are vying for deposit dollars from basically the same customers, says Daugherty.


Bankers say fears five to 10 years ago that brick-and-mortar branches would become obsolete because of a trend toward online banking didnt turn out to be well-grounded. They say the convenience of online banking has enhanced the banking experience and made it much easier for customers to monitor their day-to-day personal finances, but hasnt replaced the need for branch banking.


We have learned as a society and as an industry that most people dont like to do all of their banking electronically, says Hippler.


Still, Fewel and Daugherty predict that 10 years from now, future changes in automation and technology yet could radically alter the relationship between bank branches and customers.


Contact Rocky Wilson at (509) 344-1264 or via e-mail at rockyw@spokanejournal.com.