Cost-Cutting Leads Small Banks to Go Green

Several community banks are taking a serious look at building eco-friendly branches — not just to be "green," but to save some green.

So-called green branches can help banks save money. They could also help smaller banks differentiate themselves from larger competitors — as long as the message comes across as genuine, industry experts say.

"Community banks have a much greater opportunity to do something green than the larger banks," says Brad Pease, director of the signature buildings practice at Paladino, a consulting firm that focuses on green building. "They have the flexibility to target their efforts to something specific to the community they are in."

To be sure, it can be costly to construct branches that the U.S. Green Building Council certifies for Leadership in Energy and Environmental Design, or LEED. Still, there are simple and inexpensive changes that banks can make to become more environmentally friendly, industry experts say.

Companies that are too small for a complete energy audit can still ask their local utility company for a free evaluation of a building's energy usage, says Michael Payne, corporate counsel for APPI Energy, an energy consulting firm.

Proper maintenance of heating and cooling systems can significantly reduce bills, Payne says. Banks can also develop a green housekeeping plan that involves using cleaning products that do not have chemicals considered harmful to employees and customers. Banks can also install energy efficient light bulbs, Pease says.

There are a number of larger renovations that are relatively cheap and easy, industry observers say. Companies can actually increase in revenue by participating in demand response programs, where businesses are paid to reduce energy consumption during peak times.

"We are seeing more banks, especially those with multiple locations, aggregate their consumption," Payne says. "They can curtail their usage . . . and get paid for it."

Lighting fixtures are "changing rapidly, becoming more efficient and give excellent quality of light," Payne says. Installing such fixtures can reduce energy usage. New lighting can lower air conditioning use because they emit less heat. A complete lighting overhaul can, over time, reduce utility bills by up to 30%, he says.

Freedom Bank in Columbia Falls, Mont., decided to design its branch to be as energy efficient and maintenance free as possible, says Don Bennett, president of the $45 million-asset company.

"I looked at it as an investment in the future," Bennett says. "Energy prices are likely to increase, so the payback time is relatively short. And my most important asset is my people, so I want to make them as comfortable as possible."

Freedom, which opened its branch seven years ago, pays energy bills that are significantly lower than those at other banks Bennett has worked for, he says. The building was constructed using triple-paned windows with the blinds built inside the windows to prevent dust build-up. The branch also has a highly efficient air handling system, and each office has its own thermostat so employees can adjust temperatures to their liking.

Bennett pushed for the upgrades mainly as a cost-saving measure, but also because "it was the right thing to do," he says.

"I think it's going to be critical for smaller banks to do everything they can to conserve, reduce expenses and increase productivity," Bennett says. "Margins are getting narrower and the government is helping the big financial institutions, so it's crucial for community banks to focus on increased efficiency from a workforce and energy standpoint."

Energy efficient projects often fail when companies neglect to appoint someone to officially supervise the effort, industry experts say. It is important to find someone who is passionate about the cause and give them the authority to take ownership over researching and implementing upgrades.

When Kennebec Savings Bank in Augusta, Maine, decided to demolish an existing building to build a new branch, Andrew Silsby, an executive vice president, was heavily involved in the process. The thrift also decided to apply for LEED certification.

To make sure that the new building would blend with the surrounding architecture, Kennebec opted to aim for a traditional look that also featured green construction, Silsby says. For instance, the thrift ordered shingles that looked like traditional dark ones used on houses but were made from glass to reflect the sun's rays.

The $803 million-asset thrift also installed a geothermal heating and cooling system so the facility doesn't burn oil. Light-motion sensors, which also detect noise, are located throughout the branch, which opened in December.

"It wasn't in a mission plan to have an eco-friendly branch by 2012 but if we had to build this from scratch we decided to do it right," Silsby says.

Throughout the process, Kennebec tried to be "LEED smart," Silsby says, meaning that the thrift considered various options but only implemented the ones that made financial sense. For instance, the thrift nixed installing a domestic solar hot water feature because the six employees in the building use very little water and the added cost would not be recouped, he says.

Kennebec is considering using some of its green features in other branches, but it would probably stop short of pursuing full LEED certification again because of the costs, Silsby says. The thrift is awaiting the results of its application for silver LEED certification.

"I'm not a tree hugger," Silsby says. "But I've definitely become more environmentally conscious. I've learned a lot through the process, and this will definitely benefit our pocketbook."

Banks should incorporate green features into the actual design of their branches so it becomes part of their image, Pease says. Tying renovations to the local community is also a great way to connect with customers. For instance, if pollution of a local water source is a big issue, making changes to water usage can send a powerful message.

"If you try to make it a stealth message, then it doesn't feel very authentic or credible," Pease says. "The environment may be benefiting from it but you, as an organization, are missing out on a chance to differentiate."