A Modern Playbook: Leveraging Big Data for Decision Making in Financial Institution Growth and Branch Design and Construction

Categories:

• Banks
• Consulting
• Credit Union
• Data
• Services

With LEVEL5’s 20 years of experience, we have developed a modern growth playbook that relies on big data rather than old-school intuition, providing quantifiable insights that have consistently achieved business success.

In this article, we will explore the significance of data in expanding financial institutions long-term, the limitations of intuition, and how LEVEL5’s data-driven approach can help your institution make strategic decisions with unparalleled precision.

The Power of Data 

Data vs. Information

Data is the foundation, but it is the interpretation of that data that turns it into actionable information. Think of an alarm clock displaying the time—it’s data. The actionable information is that it’s time to wake up. Similarly, financial institutions need actionable information—what to do and when to do it—derived from data in order to make informed decisions.

Using Data for Strategic Branch Network Decisions

LEVEL5’s Strategic Consulting Group has a finely honed analytical process, utilizing both private and public data points. We have developed custom algorithms that provide fool-proof, data-driven facts to guide strategic decision-making. This approach ensures that expansion market decisions are not based solely on intuition, but rooted in concrete data.

Market Analysis for Credit Union & Bank Growth

When assessing new expansion markets, relying on intuition is no longer sufficient. 

For example, when considering a new branch location, perhaps a specific idyllic area in the community first comes to your mind. 

You might “feel” this is a prime spot for growth, but how far does this “feeling” really get you?

Sure, it may be a well-trafficked area, perhaps near a hub of retailers, but what if there are even more optimal locations in your town unbeknownst to you, spaces with even more traffic, even more of your member demographics, and with even more potential for future growth?

It pays to know!

That’s why each market decision must be backed up with careful, in-depth analysis that helps you minimize unknowns and maximize potential. 

LEVEL5 has been assisting clients with market analysis for two decades. Our comprehensive approach examines state, county, metro, and trade areas to determine growth trajectories that make sense both in the present and for the next 5-10 years. The resulting reports provide clients with a 10-year branch pro forma, offering accurate visibility into how a branch will perform on a specific street corner.

By analyzing data at various levels, including state, county, metro, and trade areas, we provide actionable insights that enable informed decision-making.

De-risking Growth Decisions with Unbiased Data

The Role of Data in De-risking Decisions

Data provides clarity and reduces uncertainty when making growth decisions. It allows financial institutions to understand their “elbow room” in a given market and forecast performance accurately. 

By running multiple pro formas that consider branch types, personnel, and technology fit, LEVEL5 ensures decisions are based on reliable data rather than subjective intuition.

Data Points the Way

The Power of Data-Driven Decision Making: Insight Beats Intuition

Data-driven decision making is not new. Industries such as e-commerce and sports have long embraced the power of data to enhance their strategies. Financial institutions can also harness this power to inform their branch playbook and make well-informed decisions.

By basing your decision-making on quantifiable insights rather than intuition, you set your financial institution—whether a community-owned bank or credit union—on a path toward sustainable, long-term growth.

LEVEL5’s Holistic Approach

LEVEL5’s approach to strategy and market analysis goes beyond traditional consulting engagements. We combine market analysis with site selection, ensuring that the quantifiable insights provided are actionable. Our comprehensive process involves two main components: critical inputs and outputs.

Critical Inputs:

The critical inputs for LEVEL5’s market analysis are derived from a range of data sources. These include proprietary data points exclusive to LEVEL5, as well as data points specific to the financial institution itself. 

Staffing interviews provide qualitative and quantitative insights, while market segmentation analysis and trade area analysis contribute to a comprehensive understanding of the market.

Outputs:

The outputs of LEVEL5’s market analysis process provide clients with actionable information. 

A 10-year pro forma offers visibility into a branch’s performance, including key factors such as loans, deposits, and return on investment. 

Branch type models allow for flexibility in considering different branch types, while the staffing model helps evaluate the impact of personnel on performance. 

Additionally, technology-needs assessment ensures that capital costs related to technology are considered in growth decisions.

Grow Your Financial Institution with Confidence Through a Data-Driven Strategy

In the dynamic world of financial institutions, and especially in a tough business environment like the one we’re facing today, relying solely on old-school intuition is no longer enough to stay competitive. By embracing big data and adopting a data-driven approach, financial institutions can make informed decisions and build with confidence.

LEVEL5’s expertise in utilizing data and providing actionable insights has made us a trusted partner for financial institutions looking to design and build successful branches. 

By leveraging the power of data, LEVEL5 helps financial institutions navigate the evolving landscape with assurance, backed by accurate insights and strategic decision-making.

Contact LEVEL5 today to learn more about our proprietary data-driven approach and unlock the growth potential of your financial institution.

Peoples Trust | Main Office – Houston, TX

Categories:

• Announcements

Peoples Trust New Main Office in Downtown Houston Positions the Credit Union for the Future

Peoples Trust Federal Credit Union is a $500 Million credit union in Houston, TX. The Credit Union’s beginnings are with Shell Oil. However, they expanded their charter to the City of Houston over a decade ago. As the oil and gas industry continues to change, and the Credit Union continued to flourish its lease was coming due. With the proposed rate increases and need for more space, the Credit Union faced large operating cost increases well above their current costs. The Credit Union’s headcount growth, and the rate increases required they seek the best long-term solution for the Credit Union. Ultimately, the Credit Union chose to relocate their main office to a new site in Downtown Houston.

[metaslider id=6148]

The selected site for the freestanding building is in an underserved area of the city, and required environmental site work to make it suitable for the building requirement. The LEVEL⁵ team worked through the permitting and containment of those materials to develop the new main office. The move to this facility not only gives the Credit Union a giant billboard, but also allows the Credit Union to substantially lower cost from rising rental rates and provide better community access. Furthermore, through our proven design-build process we were able to shorten the construction duration by over a month from the contract date!

The facility focuses on efficiency and embracing the Credit Union’s legacy to its membership and community. But, there is so much more to this design-build story, so listen to what their team had to say how this new facility took shape!

Loan Growth | 7 Ripples Through Your Main Office

Categories:

• Announcements

Growth means we have to plan for today and position for tomorrow.

Riding the Loan Growth Wave. Earlier this week, the FDIC reported that banks had a blockbuster second quarter. The nation’s 6,058 FDIC banks earned $43.6 billion in the second quarter, up from $39 billion in the first – a 1.4% rise in net income. These earnings were fueled by over $182 billion new loans, compared to $100 billion in the first quarter.

Furthermore, Callahan & Associates is reporting loan growth for credit unions is also on a run. In fact, credit unions are riding an 8 quarter wave – resulting in double-digit annual loan growth the last two years.  For banks and credit unions, this is great news, allowing many to thrive.

Today and Tomorrow. However, with growth comes challenges. Challenges for today and tomorrow. For today, FIs are challenged with servicing and processing this business. For tomorrow, they have to position for future growth, as well as outpace and out-position the competition all while serving an ever-evolving customer base.

Main Office Transformation

This post is the first of a multi-week series on Main Office Transformation. This series will address how Banks and Credit Unions can deal with all the components of transforming their main office to thrive today…and tomorrow. To begin, let’s consider the ripple effect of loan growth on the institution.  These ripples touch on the areas where loan growth exerts pressure, creating the need for a strategy to deal with the pressure. For each component below, the FI must address:

• Scalability – How do we provision for the future?
• Flexibility – How do we build-in the ability to change?
• Proximity – How does the Bank or Credit Union engrain its culture across the departments?

Ripples, Pressure and Waves – Oh My!

1. Lending Department – This is the most obvious and intuitive area where loan growth exerts pressure. After all, it’s their fault we have all these loans!! On a serious note, increasing loan volume puts increasing pressure on the department.  The entire sequence of activity – originating, underwriting, processing, closing, packaging and selling – must scale with loan volume.  A variety of organizational structures and processes define how a new loan moves through the institution.  All along the way, the people and technologies that touch the loan must be accommodated.
2. Loan Servicing – Once the loan is closed, then servicing activity begins. While this is a “given,” it is also an activity distinct from the loan originating/underwriting function. Loan servicing can be greatly impacted by technology, promoting efficiency, it is also subject to the cyclical fluctuations in the lending market.  Hence, scalability and flexibility become important features in planning.  Depending on the company’s operating philosophy, locating it in close proximity to the Lending Department may also be desirable.  Proximity can help build and sustain a cohesive lending culture and can provide a form of feedback to originators and underwriters.
3. Collections – The “inconvenient truth” about lending is that sometimes loans don’t perform as planned. The Collections Department must step in and manage the process of getting the loan back on track, or recovering the collateral.  As with the upstream lending functions, requirements for collectors rise and fall with the economic cycle.  Further, their requirements for staff and space are influenced by the company’s underwriting philosophy.  Some FIs chose looser underwriting standards to accommodate higher rates for higher risk, and understand that higher delinquencies are a natural consequence of that decision.  More conservative FIs choose higher underwriting standards, and argue that lower loan yields are mitigated by the decreased costs of collections (staff and space).
4. Contact Center – The Contact Center may be tied to the Servicing function mentioned above, or may operate independently. In either case, increasing loan volume will boost the requirement for customer communication.  Intuitively, this is manifest in cases of customers calling/emailing/texting/chatting with the FI to address routine or unusual questions about their loans.  A second aspect to the Contact Center is outbound sales. (We’ll talk more about this next week.)  As part of the onboarding process, particularly with indirect loans, this may mean periodic calls/emails/texts to the customer to make them aware of additional products and services that would benefit their financial lives.  Scalability is an ingrained factor here, assuming that the Contact Center also fields customer inquiries on a broad range of topics, not just lending.  Privacy is often a concern in planning for this function as undue background noise can distract from the conversation, diminishing the FI’s professionalism and tarnishing the brand.
5. Compliance – Increasing loan volume increases the burden for Compliance. However, strong policies and procedures that are consistently followed can reduce the need for greatly expanded staffs to handle these chores.
6. Marketing – Success breeds success, new loans create the opportunity for add-on sales and subsequent customer development. Marketing is directly involved in this activity, although the impact of increased lending is usually not linear in terms of pressure on staff and space.
7. Accounting – Of course, someone has to keep track of all the dollars and cents flowing through the organization. And, hopefully, the new loans are generating plenty of dollars and cents. As with Marketing, Accounting is an area where the increased volume has a minimal impact on staff requirements.

Plan to ride the waves

The planning process to address the effects of growth is straightforward in concept, although there are some details that are critically important.  At a high-level the process goes something like this (as mentioned earlier we’ll dive deeper in these categories in the coming weeks.):

1. Forecasting – Using the FI’s best crystal ball, the organization needs to forecast and project where it will be over a 5 to 10-year horizon in terms of loan growth. This usually leads to a healthy discussion of portfolio mix, products that should be added, products that should be deleted, participations, commercial/consumer mix, etc.  Sober thinking is required.  The temptation to “aim for the moon” will result in overestimating requirements, if the results are not achieved.  Conversely, sandbagging makes achieving desired results easier, but tends to understate future space requirements.  As a result, the FI may find itself on a treadmill, constantly trying to add resources, and space – losing efficiency and profit as a result.
2. Calibrate – Most of the functions mentioned above can be calibrated. The exercise at this point is to establish benchmarks, and calibrate each function based on the loan growth projection.  Questions naturally arising during this activity include insourcing/outsourcing functions, changes in technology, and changes in organization or operational processes.  The end result of this effort should be a staffing model forecasted in conjunction with the loan projection.
3. Allocate – Once the staffing model is in place space can be allocated for each function, based on the calibrated personnel forecast. In this phase, the common functions also have to be considered – file rooms, conference rooms, break rooms, etc.  Combined with the staffing model, the space allocation yields the planning requirements for the functions impacted by growth.
4. Program and Plan – In concert with design-build professionals, the company’s representatives will develop the program i.e. the instructions to the design-build team that ultimately defines the facility that will support the staff.

Connecting the Ripples. Most FIs welcome the ripple effects of loan growth on their main office because it allows the company to continue providing its value proposition to the community, customers, and stakeholders. However, addressing the growth takes a steady hand, and a team to get it right. In the coming weeks we will address this process to help you along your way.

Addressing the pressure of loan growth on the main office positions a Bank or Credit Union for success today and tomorrow.

Much of this change is in the call center. What does today call center do that yesterday’s did not? Read more below.

Transformation at the Brand Forum

Categories:

• Announcements

LEVEL⁵ Transforms Branches at the Brand Forum

Company Transformed Municipal CU’s Entire Branch Network

 

In a 15 minute rocking presentation complete with video clips and inspiring audio tracks, LEVEL⁵ showed the recent 2015 Financial Brand Forum attendees how the company would transform New York City’s Municipal Credit Union’s complete branch network. Municipal Credit Union (MCU) was selected by The Financial Brand as this year’s branch makeover financial institution from a multitude of institutions that applied.

MCU was represented on stage for LEVEL⁵’s design-build branch makeover presentation by Carole Porter – Senior Vice President, Chief Retail Banking Officer and Agnes Payadue – Vice President, Retail Banking Operations/Contact Center.  Mike Colvin and Jason Summers presented LEVEL⁵’s innovative branch transformation concepts to the Credit Union’s team and the audience. MCU principally serves New York City employees and their families and the employees and their families of related agencies and companies in New York City and State.  The Credit Union has 16 branches, more than 350,000 members and over $2.0 billion in assets.

LEVEL⁵’s presentation started with a video highlighting MCU’s New York City location, its branches and its members.   From there the LEVEL⁵ team showed how a new brand language could be developed using MCU’s existing logo with enhanced colors and images. New MCU branded icons were presented representing the many products and services MCU offers.

LEVEL⁵’s branch makeover started with MCU’s Flagship Branch in the heart of Manhattan near City Hall, NYPD headquarters, and other municipal buildings. LEVEL⁵ divided the 5,000 square foot branch into 2 zones:

• The front of the branch – less than 5-minute zone for transactions
• The back of the branch – greater than 5-minute zone where members could be serviced and educated by MCU Guides, a new concept suggested by LEVEL⁵ to replace Member Service Representatives

The less than 5-minute zone uses ATMs and Interactive Teller Machines (ITMs) for transactions with a small teller line to be phased out overtime. The greater than 5-minute zone included technology such as tablets, large format touch screens, video conferencing, etc. to facilitate member service and education.  The entire branch was transformed into a bright, colorful, highly branded environment with a variety of comfortable, casual sitting and standing member collaboration areas.

From the Flagship Branch, LEVEL⁵ moved to transform an actual MCU Express Branch, approximately 1,500 square feet.  LEVEL⁵ again divided the space into the previously mentioned two zones with the front of the space being transaction-oriented using ATMs and ITMs, and the back of the branch providing member service and education by MCU Guides using technology tools in the same bright, colorful, highly branded environment as the Flagship Branch.

From the Express Branch, LEVEL⁵ presented an MCU Micro Branch concept of approximately 500 square feet with the same highly branded look and feel of the previously presented branches. The branch is not planned to be staffed, but contained ATMs and ITMs using video teller service.  The vision is these Micro Branches could be conveniently and cost effectively placed in lease space throughout the city.

Finally, LEVEL⁵ presented an MCU Mobile Branch concept called a Power Pod complete with ATMs, ITMs and multiple self-sustaining Power Pads that could be placed around the Power Pod. The Mobile Branch can be moved around the city to parks, colleges and university campuses, as well as to special events.  The Mobile Branch will be a great way to promote MCU, recruit new members, and provide convenience to existing members.

Mike Colvin, LEVEL⁵’s Executive Vice President and Principal, said “LEVEL⁵ has received tremendous positive response from our MCU Branch Makeover Presentation at the 2015 Financial Brand Forum.  We had a lot of fun and showed MCU and the audience how financial institutions can makeover and transform their branches.  Several institutions have reached out to us since our presentation asking us to help them makeover their branches using our design-build approach.  We have placed an 11-minute video on our website at LEVEL5.com for anyone that may want to see a summary of the presentation.”