Whats Next For The Branch Network

What’s Next for the Branch Network – Rationalize or Revisit?

David KersteinPeak Performance Consulting Group® November 5, 2009

Action Case study Take-away Now!

• Financial institutions need to more accurately target opportunities for de-novo growth and to optimize performance of existing branch networks

• “Best practice” banks are making more sophisticated use of segmentation data to target specific growth markets

• Innovative use of technology can improve service and distribution reach, while significantly reducing cost

Peak Performance Consulting Group --

Bank Branches: Do We Have Too Many?

Banks have been building branches faster than population has been growing21% of branches have been open less than 10 years

1950

1953

1956

1959

1962

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1971

1974

1977

1980

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1989

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1995

1998

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2004

2007

100

150

200

250

300

350

400

450

500

Bank Branches Grew Twice as Fast as Population(indexed to 1950=100)

Bank BranchesHouseholdsPopulation

Source: FDIC, US Census, Peak Performance analysis


Branches Losing Role as Transaction Point

Fewer checksDeposit activity shifting to direct deposit and remote captureGreater use of online payment and debit point of saleOnline bill payment projected to grow at CAGR of 19% through 2012


Branches remain critical driver of deposit growth41% of all deposit growth comes from 8% of branches open less than 2 yearsNeed physical branch locations to continue to grow consumer and small business relationshipsAggressive growth in branches due to competition for deposits\\

Net Branch Household Growth

0

200

400

600

800

1,000

1,200

Year

Avg

Bran

ch H

HLDS


Too Many Branches or Still Room to Grow?Differences in branch density driven by:

Self service channel usageCultural preferences for face-to-faceBranch formats: smaller, more community oriented vs. hub locationsCompetitive environment

0

200

400

600

800

1000

1200Room to Grow? Bank Offices per Million Residents

Source: Bank for International Settlements, Peak Performance analysis


Industry Best Practices Drive Significant Improvement in Result

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Branch Deposit Growth

Non-BankPower® BranchesBranches using BankPower®

Month after opening or re-launch

Aver

age

Depo

sits

Source: Peak Performance client data

Pick the right spots: improved market and location analysisBetter local market knowledge and relationship managementLeveraging new distribution models


Revitalization or Reinvention? We Need BothTremendous opportunity to improve revenue growth and cost effectiveness of existing branch network

Refine mix of branches: size, type, segments served Improve local market segmentation and sales management

Continued growth requires distribution expansion, but picking the right channels, markets, sites will be increasingly complexEconomics will drive shift to smaller, more cost efficient facilities that need to be managed differently

Greater use of technology for transaction processing and remote delivery of service

Different staff skills: more utilization of universal staff with fewer specialists

Tighter integration with hub branches or call centers to provide specialized expertise

Greater emphasis on micro-market knowledge and outside sales calling to improve market penetration


Recipes for Success: the “Secret Sauce”

• John Zugschwert• Senior Vice President, Distribution Analysis• Citizens Bank• [email protected]

• Alex Calicchia• EVP and Chief Marketing Officer• MidSouth Bank• [email protected]

• Chuck Purvis• Chief Operating Officer• Coastal Federal Credit Union• [email protected]

https://www.coastal24.com/index.html

Thank you!

David KersteinPresidentPeak Performance Consulting Group512-607-6332dkerstein@ppcgroup.comwww.peakconsultinggroup.com


Identifying Strategic Opportunities in Branch Distribution

BAI Retail Delivery

John ZugschwertSVP, Distribution Strategy

November 5, 2009

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RBS: Market Leading Customer Franchises

UK #1 Small business banking #1 Corporate and commercial #1 Cash management #1 Private banking #2 Personal checking #1 Auto insurance #2 Household insurance

US #1 branches in New

Hampshire and Rhode Island #2 branches in Pennsylvania #2 deposits in New England #3 deposits in Pennsylvania

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Twelve State Franchise Strong franchise in New England and Pennsylvania with good

branch distribution in the Mid-West

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12 States76 Metropolitan Areas

372 Branches

644 Branches

492 Branches

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Our Challenges

New England: well situated in terms of deposits and branch share

Mid Atlantic: well situated in terms of branch share but lag in deposit share

Mid-West: Sub-scale player with low branch share, but markets generally over-branched

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Strategic Market Development

Citizens Bank has a very large geographic footprint. The creation of specific strategies for each metropolitan market is critical to overall success.

Strategic Market Prioritization and Strategy

• Which MSA Level Markets have the highest potential?– Growth– Value– Economic Outlook

• What is the strategy for each market relative to position?– Overall convenience or niche opportunities?– How can Alternative Delivery Support Growth?

- ATM Network Partnerships- Co-Branding Opportunities

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Organizational Growth – De-Novo Branching

Once overall market strategies have been developed tactical plans can be executed. Given the competitive environment, prioritizing submarkets within metropolitan markets for growth and creating strategies is key to success.

Tactical Sub-Market Prioritization• Where are the highest potential sub-markets within each

metro market?• Can we create critical mass in the sub-markets?

Trade Area Opportunity Assessment• What is the long term potential for each individual branch

decision?– Combination of advanced modeling and market experiential

knowledge

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Market OpportunityCompetitive Environment

Deposit GrowthAverage Branch Size

Proximity to other CFG BranchesBrand Equity

Branch CharacteristicsSuitability

AccessibilityVisibility

TypeHours

StaffCustomer SatisfactionRelationship Building

ExecutionEngagement

Statistically 65% to 70% of the variability in branch performance can be attributed to the geographic market in which the branch is located.

Primary attributes are competitive strength of the market and proximity of other CFG locations.

Features of the branch directly effect the performance of the location.

In-Stores typically generate 33% of traditional free standing branch deposits and In-lines generate 70%. There is a trade off between expense and performance.

The staffing of the branch is critical to its ultimate success. Poor performing staff can undermine the branch’s performance. However staff performance alone cannot compensate for weak market conditions or poor branch design.

Branch Performance Hierarchy

Branch Performance can be explained with the following factors

Each factor builds from the lower factors in the pyramid.

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Organizational Growth - Existing Network Optimization

Maintaining the value of the Existing Citizens branch network has significant upside potential given the size of the overall network. Key focus areas include:

•Branch and Customer Segmentation – Focus on best opportunity– Branch segmentation will lead to strategy development and

prioritization of investment– Customer segmentation will lead to effective opportunity development

at customer and branch level

•Technology – Focus on High Quality Service Efficiency– CRM

» Customer Level and Market Level– Transaction Automation

•Branch Characteristics – Focus on the optimal branch features– Layout– Visual Appeal– Features – Drive-Thru/ATM/etc.

•Branch Placement – Are we in the right locations?– Trade area potential– Visibility– Accessibility

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Create 4 distinct branch segments with specific short and long term tactics for each

Segmenting the Branch Network

Segment 1 Large Branches

WithAdditional Opportunity

Segment 2 Large Branches

Currently Exceeding Their Market Opportunity

Segment 4 Smaller Branches

Currently Exceeding Their Market Opportunity

Segment 3 Smaller Branches

WithAdditional Opportunity

Additional Market Opportunity

Bran

ch S

ize

StrategyService &

Sales

StrategyService

StrategySales

StrategyPerformanceMaximization

Opportunities for impact:

• Goal Setting• Marketing/

Merchandising

• HR Allocations

• Partner Support

• Sales Activities/ Campaigns

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Recap

Strong franchise

Different strategic advantages in different markets

Refocusing resources to capitalize on opportunities

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Cranking Up the Offense: Building Deeper Customer Relationships__________________________________________________________________________________________________________

BAI Retail DeliveryNovember 5, 2009

Alexander CalicchiaExecutive Vice President & Chief Marketing Officer

MidSouth Bank Profile

WHO WE ARE• Headquartered in Lafayette, Louisiana• Total Assets: $938 Million

GROWTH-ORIENTED1985 – Chartered as a National Bank1987 – Acquired Breaux Bridge Bank & Trust (LA)1989 – Acquired Commerce & Energy Bank (LA)1993 – Listed on AMEX: MSL1995 – Acquired Sugarland State Bank (LA)2004 – Acquired Lamar Bank (Beaumont, TX)2008 – Merged MidSouth Bank Texas into MidSouth Bank, N.A.

BUSINESS FUNDAMENTALS• Small business focus supported by retail and commercial funding• Experienced leadership• Entrepreneurial management style• Organic growth• Quality relationships and dedication to customer service 22

Market Footprint

· Strategically Located along I-10, I-49 and Hwy 90 Corridors• 35 locations• 170+ ATMs

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MidSouth Bank Growth Strategy

“Cranking Up the Offense”

Delivering Value Through InitiativeAcquiring new customersIncreasing cross-sellingDeveloping and Maintaining Closer Relationships with customersImproving Operational Efficiency

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Strategic Vision

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“Staying True to Our Tradition”- Rusty Cloutier, CEO & President, MidSouth Bank

We are going to place even greater emphasis to develop deeper more personal relationships with our commercial and retail customers to better meet their needs.

Provide a greater emphasis on: decentralized decision-making, employee empowerment increased knowledge about our customer, improved processes

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Success Strategies

Our challengeThin distribution over a large footprintShift from acquisitions to organic growth

How we’ll succeed: Better tools: Oracle On-Demand CRM Better products: market and customer

segmentationClarity of Focus: better support infrastructureChanging the game on distribution

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Solution Key Benefits Features Metrics

Sales Improve sales productivityIncrease cross and up-sellingStreamline forecastingMaximize pipeline visibility

Account and opportunity management Contact management Activity and calendar management Outlook email integrationOutlook and Palm Synchronization

Cross-SellClose RateOpportunity CoverageEfficiency

Marketing/Campaign Mgmt

Accelerate lead to opportunity conversionMaximize marketing spend efficiency and ROIEasily administer campaigns

Closed-loop two-tier lead managementAutomatic lead assignmentsCampaign managementEasily import account, lead, and contact lists

Increased LeadsResponse RateClose Rate

Service Integrated support across multiple channels at low costEnhanced service effectivenessIncreased customer satisfactionSupport dispersed service agents

Hosted contact center: phone, web, email and chat Intelligent call queuing and routingComputer telephony integrationService request managementSolutions management

RetentionService to SaleCost/Call

Business Intelligence Drive more informed decisions across all levelsConvert insight into action Track and manage historical trends

Embedded interactive analytics Prebuilt dashboards with drillable charts35 prebuilt reports with 250+ analysesPowerful ad hoc analysis toolPrebuilt data warehouse

KPI AdherenceNew Program DevelopmentTrigger/Alert Programs

Better Tools: CRM On-Demand

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We Understand Our Customers

Younger Years38% Market

Penetration Index=60

Family Life40% Market


Mature Years22% Market


Elite4%

Wealthy Families6%

Wealthy Seniors3%

Up and Comers7%,

Boomer Comfort6%

Upscale Mature7%

Metro Mainstream14%

Middle Income Families14%

Midscale Mature2%

Fledgling17%

Working Class14%

Low Income Retirees5%

Lifestage

$

Consumer and small business segmentation in each marketProduct usage, preferences, and potential

Sales & marketing strategiesProduct development & pricing

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Example: High Level Consumer Segmentation in MidSouth Markets

Improve Effectiveness

Integrated brand communication: Web, Point of Sale, Newspaper

Intranet for employee communication and training

Video conferencing for remote training and management coordination

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Cranking Up the Offense

Town Hall meetings: Lending in the New Economy Integrated marketing Aggressive PR

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Rusty Cloutier Has Money to Spare JIM RENDON

Rusty Cloutier wants to lend money. If you live in Lafayette, La., you already know this. In large black letters hovering above a pile of bundled green bills, billboards all over town announce, “We have $200 million to lend.”

Questions & AnswerContact Info:

Alex [email protected]

(337)593-3008or find me on:

www.linkedin.com

Let’s Wrap It Up!

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mailto:[email protected]

http://www.linkedin.com/

Express Tellers: A New Model for

Improving Distribution Effectiveness

Chuck PurvisChief Operations Officer

Coastal Federal Credit UnionRaleigh, NC

About Coastal

• Headquartered in Raleigh, NC

• Chartered in 1967 to serve employees of IBM

• Today we serve 1,200+ employers & associations

• 201,000 members

• $2.2 billion in assets

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Community FocusNational Access

• 19 branches in the Raleigh-Durham and Charlotte markets

• Access to 3,797 shared branches nationwide

• Access to 55,000 surcharge-free ATM’s nationwide

• CO-OP Network• Allpoint Network

• Coastal24.com Online Banking34

Our Challenge

• Provide convenient branch access in two metro markets while controlling branch network costs

• On-campus locations ideal for members from large employers, but economics do not support free standing branch

• Need solutions that allow physical expansion at low cost to serve

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Express Teller Technology• The Vision . . .

“To deliver first class member service right to theteller line . . . remotely!”• It is:A full-service, face-to-face member experience that uses the power of video to improve efficiency by reducing headcount while enabling cost-effective branch expansion.• It is NOT:The drive-up inside. There aren’t any pneumatic tubes loudly shuttling transactions to and from a teller room hidden in the back of the branch.

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Benefits of Express Teller

•Provides superior service than a traditional teller line or remote teller system.

•Leads to expense reduction – FTE may be reduced by as much as 50%*.

• Enables the ability to offer extended teller hours.

• Reduces the required footprint of the branch itself while at the same time facilitating branch expansion.

•Fosters sales by freeing the Branch Manager and platform staff from day-to-day operational

teller tasks.* Results based on a full conversion of a branch network of at least 10 locations.

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Two-Year Plan

10/31/09 12/31/09Target

12/31/10Target

Locations 13 13 15-19

Units 41 41 65

New Express Branches

1 1 1-4

Number of Express Tellers

21FT/2PT

25 36

7am-7 pm Locations

12 12 10-14

SaturdayHours

12 12 10-14

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Express Branch• Converted branch on IBM campus in 2009

• Installed standalone unit at Lenovo campus in July• Lenovo is converting thru-wall ATM space into office

space• Member service associate will start 4th Q

• 4,000 Lenovo employees work on campus

• Operates as a spoke of a larger branch

•Very Cost-effective: Express Branch model will allow us to open with as little as 1 Express Teller machine and 1 associate.

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Functionality• Cash and check deposits

• Cash and coin withdrawal• Official check withdrawal

• Account inquiries and transfers• Signature pad

• ID verification• Receipt printed• Check 21 enabled

• On-screen account # entry• Handset/hands free

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Express Teller Service Center

“We are replacing 110 branch tellers and

supervisors with 48 Express Tellers and 3

supervisors to service our 19 location branch

network.”

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A Success Out of the Gate!

1. During a Winter storm Coastal was able to open two branches with a single Express Teller from our headquarters that otherwise would have been closed.

2. Our Express Teller Machines , equipped with battery back-up power, kept member service up and running during a power outage.

3. Our extended hours transactions are spiking, 2,500 sessions in October.( 7:00-8:30 a.m. and 5:30-7:00 p.m.)

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Better Ability to Serve Extended Hours

1. 40,000 Express Teller sessions in October

2. Express Teller session comprise 65% of total branch transactions in October

3. 6% of Express Teller sessions done during extended teller hours in October

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Members Migrating to Express

Q1 2009 Q2 20090

2000400060008000

1000012000140001600018000

Wakefield (Express)IBM (Traditional)

Total Branch Sessions

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Serve More Members Without Increasing Wait Time

7 8 9 10 11 12 1 2 3 4 5 60:00

0:28

0:57

1:26

1:55

2:24

2:52

3:21

3:50

020406080100120140160180200

Avg. Wait TimeAvg. Session LengthAvg. # Sessions

Time Sessions

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In Summary

• Lower costs = morelocations

• Fewer employees• Extended hours• Better service• Member acceptance

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Questions?

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Whats Next For The Branch Network

Economy & Finance

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