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The yin and yang of branching

Much has been written about the branch of the future. What does it look like? What are the key strategies? How does the member/customer experience play out? Is it even already here?

The short answer is there is no short answer – only different perspectives. The right answer, if there is a singular one to consider, is this: the branch of the future construct is entirely on you and your organization to make it as you see fit.

One perspective on the future of branching is the discussion point involving the traditional legacy of a branch and its core being the transaction, while also understanding the momentum to the modern branch being advisory.

The problem with contemplating a branch strategy from either a transactional perspective or an advisory perspective is in the “or.” Your branch strategy should not be rooted in “or” – it should be rooted in “and.”

Think about it from the perspective of Yin and Yang. Colloquially, Yin and Yang are used commonly to describe to diametrically opposed concepts, like oil and water. But in reality, the concept of Yin and Yang is actually describing two things that compliment each other – not opposing one another.

So when you are contemplating your Branch of the Future and trying to figuring out the anchor strategy of a branch that is either transactional or advisory, the answer is both.

A well designed branch will have both a transactional and advisory zone. The layouts may differ, as long as the strategy is rooted in the member experience. And the way it is executed may also vary, with different forms of cash machines deployed across different areas (both inside and outside) of the branch to appease those short visit based transactions, whether it be ITM’s in the drive-through, Cash Recyclers affixed to floating Teller Pods, Assisted Self-Service machines flanking the Teller Stations, right up to a traditional ATM for walk-up traffic.

On the advisory side of the house, designs can see casual Onboarding Stations with tablets at the ready for initial conversations, semi-private conversations at high top counters with screens for a deeper financial planning session, or a fully private conversation in an enclosed office with a resident Personal Banker, or even in a video enabled room where members/customers can speak to a remote expert.

When you’re contemplating your next branch strategy and the discussion of transactions versus advisory arises, remember the Yin and Yang – they are not individual strategies unto themselves, they are complimentary strategies that are part of a larger, engagement-based branching experience.

If you’d like to learn more about branch strategy and review floor plans demonstrating a well-executed transaction and advisory zone, contact LEVEL5 today.

The missing piece in your branch design

Programming and Visioning is a key, if not the key to a fully realized branch design.

In this article, we’ll explain exactly what Programming and Visioning is, and tell you why it’s so important to any branch design process.

Think of Programming and Visioning like this: If you are planning to get married, all the different considerations and decisions such as the city it will be held, what time of year, who will be attending, the venue, the logistics of those in attendance such as seating, flow, etc. – it can all be so overwhelming. After all, you’re not going to just have people show up with no foresight and vision. So maybe you hire a Wedding Planner who will walk you through every piece of every detail to ensure that the wedding is everything you dreamed of.

That planning phase is what Programming and Visioning is to your branch project, with LEVEL5 acting as your “Wedding Planner.”

Whether it be for a remodel or a new build ground up branch, LEVEL5 approaches each project methodically and meticulously, with a series of questionnaires, workbooks, meetings and alignment stages.

In these meetings, we discuss what’s working with your current branches, what’s not working, your members/customers, the communities you serve, and deep dives into your brand, all so we can build a plan around a Strategic Lens, which is the strategic way-finding element to a well-executed and purpose-built branch.

Understanding the goals, objectives and the retail journey, LEVEL5 will ultimately deliver your team a Project Strategy Document, which will detail all previous conversations and decision points.

Most importantly, this Project Strategy Document will give full detail into the proposed budget and schedule.

No surprises.

Full visibility.

All of this work upfront ensures that your designs are on strategy, on budget, with no wasted time or effort.

While many FI’s want to jump right into the Design phase of a new branch project, and who wouldn’t, there is work that needs to be done up front to ensure its success.

Programming and Visioning is the critical planning stage before any designs are made.

If you’d like to learn more about Programming and Visioning, contact LEVEL5 today.

Why FI Leaders Should Think Like a Developer

Just like the leader of a credit union or community bank, land developers always have growth in their sights and there are many strategies that a financial institution could benefit from to expand in an intelligent and financially advantageous way. Here’s how.

Let’s look at the big picture first; you know that your growth depends on increased loan and deposits, and a major factor of those numbers is your ability for new members to open new accounts. Branches are major avenues for creating and retaining new clients.  

Having well-placed brick and mortar branches is a necessity by geo-locating the right branch near those targeted new members/customers, so you might as well do it in a way that benefits you the most, from varying angles, just like a savvy developer. 

3 Ways to Optimize You real estate efforts

1. Develop Multi-Tenant Plaza, Occupy and Fill

If you build it, they will come.  

When you’re searching for a new prime piece of land, task one is to ensure it’s right for your organization’s needs. Beyond that, you can drive even more foot traffic into your place by making convenient shopping experiences surrounding it. Convenience is valued and appreciated ever more in our modern-day culture. Here’s how you can leverage that.  

Small retail outlets, coffee shops, restaurants, an urgent care, nail or hair salon, you name it. You’re creating a place of value for the local community and your branch is included in this hotspot.   

Prospect clientele may be drawn in by your new development, peruse shops, and realize that their banking needs can be met there as well. Another thing they can check off their “shopping” list. 

This can enhance relationships with existing clients in this market as well. They may have more incentive to drop into your branch on their shopping or errand trips, opening up the floor for more discussion, deepening relationships. Perhaps after their coffee next door, they’ll remember about that new account they’ve been meaning to open. 

If the idea of a plaza seems overwhelming, sublet just one part of your building to a boutique business like one of our clients did with a soda shop in Utah!  

2. Extra Land Extra Value

Secure a parcel of land that’s larger than your immediate needs require. This doesn’t necessarily mean go all out and grab 20 acres more than you need, but this can be done with a purposeful and lean strategy. Remember, the developer is always thinking ahead, just as you are. 

One LEVEL5 client benefitted greatly with this strategy by purchasing a 2 acre plot, then built their new, best-in-class branch on 1 of them. The property value of the empty acre then rose due to the modern branch’s proximity. 

The grand finale? This client ended up selling the empty acre for more than what they had bought both acres for.  

Now that’s a return on investment for the record books.   

When considering site selection, always work with a team who has ample experience and resources in locating the right credit union or bank branch real estate for your needs.  

3. Repurpose Your Existing Space & Scale Up Simultaneously

Developers understand the need for new space, but they also know the value of strategically making the most out of an existing space, too.  

Use your goals as guideposts, then take due action.  

Consider the example story of our client Hoosier Heartland State Bank’s branch transformation and operations center needs in Indiana. They desired to breathe new life into their main branch to better meet the needs of their modern, expanding customer base while also developing a new operations center to support an increase in employees.  

This all needed to be done in a way that differentiated the bank as a leader in their community.  

They partnered with LEVEL5, who knows bank construction inside and out, and thinks like a developer. 

Their branch got an update with a new floor plan, diverging away from traditional teller lines, into a more open retail environment, giving staff a more effective way to interact with members and forge deeper relationships.  

Their operations center now fits their long-term staffing needs, and the new exteriors reflected their forward-thinking culture.  

Hoosier Bank’s President, Brad Monts added, “We chose LEVEL5 as our partner because of the value they bring to the complete design-build process. Few firms in the country can study markets, address headcount, procure real estate, design and construct facilities like their team.” 

Furthermore, their HQ is part of a larger renovated complex, where they have sub-leased space to small business owners that not only benefit their employees, but also help revitalize their home town.

Contact us today for assistance locating the right land or updating an existing branch for your needs. We have experience helping partners get the most value and return from their property.  

Act On Your Branch Growth Data Plan Before It’s Too Late!

When you go to the grocery store, and you see those ripe, crisp apples at their peak of freshness, you buy a bunch with every intention to consume them over the next day or so.

You put them in a bowl, on the counter, but if they go unattended, they begin to stale, go past their peak freshness, eventually going rotten.

In the world of banking, data and apples are one in the same. When delivered they are fresh. If left alone, they begin to stale with each passing day.

If you are a banking executive looking to grow and you are given fresh data, do you intend to do something with it, or will you just watch it rot?

When you hire a firm like LEVEL5 to assess your current and potential growth markets, you are given irrefutable data points and a 10-year proforma back-tested at 96% accuracy.

When looking to de-risk decisions, you can’t really have more confidence in the black and white, binary numbers to help support your decisions. But that data has a shelf life.

Strike the iron is while it’s still hot. Otherwise, you may miss out on real growth potential because as time ticks on, your data becomes stale, all the while, your competition will likely be making their moves.

Let’s say you receive the data and you don’t act on it for 6 months…that’s 6 months you could’ve been making progress, now lost.

Can your institution really afford to be behind for so long?   

To illustrate the real implications of inactivity, we’re highlighting some vital junctures where taking steps soon on your fresh credit union and community bank consulting analytics can have a huge impact on your future.  

3 Ways Current & Valid Data Assist Your Overall Growth 

Change is the only constant, and how you fare rests on the ability to adapt accordingly.  

That goes for branch networks too, one of your major avenues for gaining and maintaining the desired clientele.  

Visualize your branch network as an ever-adapting entity, acclimating to the winds of change in market viability and customer demographics. You need to play this strategy correctly and decisively to win out.  

In this state of flux, accurate analysis for fruitful future steps can certainly be made, but lingering on current quality data longer and longer places your organization further and further behind in making highly effective moves for your network’s viability.  

There are 3 pivotal ways to optimize your network, but acting on your current data analysis is highly time sensitive in order to reap the rewards: 

1 – Opening New Branches In The Right Areas 

With accurate market and demographic analysis aligned with your specific goals, you understand the logic and purpose behind opening up new branches in high-quality locations. You don’t want to let solid direction pass you by here, as you’ll be missing out on prime locations that will be building up your clientele portfolio and holdings. Worse yet, a savvy competitor may beat you to saturating a market before you can.  

Watch our video on Northeast Credit Union where we helped them grow into new places with informed market analysis.  

2 – Closing Underperforming Branches 

Branches that are repeatedly in the negative need to be closed and waiting too long means they’ll keep pulling valuable resources from your organization, resources that could be reutilized for growth. 

Don’t worry, closing a branch is not the end of the world, in fact, it’s just par for the course. Similar to retail environments, this is just part of the evolution. Their absence can be made up for in spades with your new locations that are prime for future performance.   

Do you act soon and save resources based on your valid data? Or do you wait to see what happens while running a real risk of detriment to your institution? 

3 – Crafting Your New Branch Prototype 

Your prototype works on so many levels to drive your institution into the future and holding back in its implementation sets you back even further.  

A world-class prototype design accounts for everything needed to make a success including, but not limited to: 

  • A floor plan to facilitate employee and member interaction    
  • A modern appearance that solidifies you as a leader in your market 
  • Branding consistent with your culture and values 
  • An easily repeatable and malleable design for effective, rapid deployment  

When you meticulously create a new branch prototype, you’re laying the foundation for attracting new members and offering excellent quality experiences for years to come. This design is carefully crafted and tailored meet the needs of your clientele’s unique demographics as well as to accommodate for the future of financial institution needs.  

Consider the following if you’re hesitant to put your prototype into action: 

Why go through all that upfront work creating the next generation of your institution, just to never use it?

What optimal land in the market will you place your new state-of-the-art branch prototype on if it’s already been gobbled up by your competitor?  

It’s undeniably important to start rolling out the new face and space of your institution before it becomes just an idea lost to time. Both your clientele and stakeholders will greatly value the exciting new look, feel, and functionality of your newly-built or updated branches.

Don’t Let Success Pass By Your Organization 

You’re truly doing yourself a disservice by waiting too long to act on quality data, plain and simple.  

LEVEL5 visualizes Actionable Data as one of our 5 Elements of a Branch Transformation Playbook and we dissect your data to purposefully point you in the right direction for meaningful, lasting expansion through branch optimization. 

Contact our team today for a 10-year pro-forma based on your performance metrics so you can make the most of your institution’s time.   

The clock is ticking… 

The Network Effect

Have you ever visited a new city and find yourself needing a pick-me-up that only a good cup of coffee will satisfy? As tempting as a local cafe can be, they are an unknown and you don’t want to take a chance and risk a good cup of coffee on a bad mom and pop shop. Luckily, you know they’ll be a Starbucks nearby. Heck, there’s likely several of them nearby. Even if it’s not your favorite cup of coffee, it’s a familiar place and you know exactly what you’ll be getting.

Familiarity and consistency may be at the heart of why franchises exist, but there’s more to the story – especially when considering the economic factors of a high concentration of locations for a specific business.

The reason you’re seeing so many Starbucks around town, and sometimes even across the street from one another, is not because they are doing you a favor and having so many locations for your convenience. Those stores are making money. And making even MORE money by the sheer fact that there are so many concentrated within a geographic region.

According to Investopedia, the “Network Effect” is “a phenomenon whereby increased numbers of people or participants improve the value of a good or service.” Translating this into retail locations, there is an increase in overall store performance by the sheer fact that there are other stores nearby.

To put this in simple economic terms, if a specific trade area has 4 Starbucks each earning $800,000 per year. The fifth location in this Trade Area will not only likely earn that $800,000 average, but because of the concentration of locations (the Network Effect), all five Starbucks locations can expect a X% lift across the board.

You can easily translate this retail strategy to your Branch Network.

If you have a good saturation of branches around a city, you are not only providing retail location conveniences to those living in that market, you will be gaining market share, share of wallet, and pinching your competitors.

Doing this even more so by accurately saturating a market with locations not only accomplishes the above, but your overall revenues and profits across the board will benefit from the Network Effect.

Now, this all sounds well and good when you talk about it in theory. The key here, however, will be execution. If you scatter branches arbitrarily around a market in efforts to achieve The Network Effect, you might not like the results. It is imperative that you do your data homework before executing this plan, or, better yet, work with a partner who specializes in interpreting data to produce the most effective strategy.

Once you’ve gathered the data, interpreted it, and created a strategy for your branch network, it’s time to execute. Not executed hesitantly, one branch at a time, to test the waters. The Network Effect can’t take place unless the network (concentration) is there. Entering one market strong with a few branches will yield better results and more loans and deposits than entering a couple different markets with individual branches.

Contact LEVEL5 today to learn more about our Strategy and Market Analysis work, which can help you find the right location, and determine the right amount of branches in a market to help you achieve the Network Effect.

Red Light… Green Light

Year after year, we all are putting more and more emphasis on care for the environment. Not only that, but consumer behavior shows that what companies support actually matters to Millennials and Zoomers (Gen Z). They don’t want to put their money towards institutions that don’t have values aligning with theirs. The environment is now at the forefront of their values and they want to make sure that they support it in every way possible. This includes the brands that they use. This includes you.

So, with the environment in mind, how can you give your customers/members the “Green Light” to bank with you.

Net-Zero Branches

Net-Zero branches are buildings that have a way of producing as much energy as they consume. This way, the energy consumed is taken from renewable resources within the building, both saving money and reducing the carbon footprint. It could also reduce water consumption and unnecessary waste. This might seem like somewhat of an impossible goal, but the technology to make this happen exists and is becoming more and more readily available.

Distributed Energy Systems

A Distributed Energy Systems, or DES, encompasses a variety of solutions to the problem of energy consumption. They focus on generation, storage, monitoring and control solutions of energy. A system with sensors and meters can keep track of buildings efficiency and performance as far as energy goes so you can control as you go. Energy efficient lighting, heating and cooling, and water sources would be great examples as well.

Energy Star HVAC

One way to achieve the net-zero branch is by installing an Energy Star HVAC system. It is a much more efficient heating and cooling system. It’s not only environmentally conscious, but reduces energy bills significantly as well. Considering that up to half of energy consumption can be attributed to the heating and cooling system, this will play a major factor in the overall energy efficiency of the branch.

Alternative Building Materials

Alternative building materials are becoming more popular as industries are finding new ways to produce environmentally friendly, yet sturdy, materials.

There are already well-known practices to eco-friendly building elements, such as installing proper insulation to make heating and cooling easier on the HVAC system, or using bright reflective paint to help with natural lighting and heating.

Newer elements that are worth looking into, however, include Grasscrete, bamboo, recycled plastic, and hempcrete.

Environmentally Conscious Design

Environmentally conscious design practices are by no means new concepts. They’ve been common for a while now and are only growing in popularity along with environmental initiatives.

Solar panels allow for sun-harnessed energy at your fingertips. Not only that, but after installation, the energy produced by them is free! There’s a good way to cut costs.

“Green roofs” are basically gardens built into roofs and a great way to save energy and costs by naturally cooling down buildings. They also have the ability to increase the lifespan of your roof by 200%, not only saving money now, but well into the future. They could also have potential to drive consumer engagement by hosting community gardens.

Lighting is another obvious, but easy and effective way to reduce that energy footprint. LED bulbs reduce energy usage and last a lot longer than traditional incandescent bulbs.

Recycling Program

Setting up a recycling process in each branch is probably the most well-known and easiest way be environmentally conscious so far.

It doesn’t have to stop with the internal workings of your institution, though. You could go so far as to organize community events for consumers with recycling as the theme. This could look like organized “clean-up” days where people show up clean trash littering parts of the community. It could also look like a competition where people could bring in items to recycle to be entered in a pool for a gift card or some other small prize.

The possibilities for consumer engagement are endless.

Looking into and implementing some of these concepts into your branches will not only encourage potential consumers to align with you as their go-to financial institution, but also save you energy and money on your branches.

Contact Us to find out more about how you can move from red light to green light.

Hub & Spoke model

Any branch optimization and expansion strategy should have a well-laid out plan regarding Hub & Spoke.

A classic and well-known strategy within the retail sector, implementing a Hub & Spoke model has a play within your branch strategy as well.

The foundation of a Hub & Spoke strategy is born in the Market Analysis phase, where geographic assessments are analyzed and overlaid with branch types that are a fit for that market. They are then perfected in the Design phase where a branch prototype is completed, along with accompanying Kit of Part components for scalability across different branch types and markets.

Here, we’ll break down the key sequential steps to planning and executing a well-planned Hub & Spoke strategy.

Step 1 – Strategic Market Segmentation Analysis

In looking at the broader Market Segmentation Analysis, this geographic assessment is your “50,000 foot” view of expansion areas, which could be at the state or county level, or both. Within this, there will be multiple Trade Areas deemed as viable expansion opportunities.

When working with LEVEL5, the key point of differentiation between other “Real Estate Consultants” is that we only make recommendations in specific Trade Areas where viable sites are available.

The sites of consideration are then ranked in order.

If you’re looking to build multiple branches in multiple geographies over the course of a 5-year aggressive growth plan, LEVEL5 will help you plot your Trade Areas based on different and varying priorities such as growth markets, demographies, loans, deposit, build-out costs, etc.

Step 2 – Branch Type Mix

Once multiple Trade Areas have been identified across a large Market Segment, you need to start thinking about which branch types fit in which Trade Areas, while also considering adjacent trade areas and their branch types.

Choosing the right branch type in a given market can be daunting, and the wrong decision can result in an underperforming branch leaving loans and deposits unclaimed in that Trade Area.

The key branch types of consideration in a Hub & Spoke model are:

  • Flagship Branch – Your primary, free-standing branch, likely offering the most services, best experience and boastful brand deployment components
  • Satellite Branch – A full-service, free-standing branch, just not to the level of your Flagship
  • Headquarters Branch – A full-service branch, embedded in your Headquarters location
  • Storefront Branch – A full-service branch embedded in a shopping center
  • Micro Branch – A smaller footprint, not offering as many services/functions, but still delivers the transactional needs of your consumers
  • Branch with Regional Office – A full-service branch, located far from your headquarters, thus the need for “back office” facilitates to support that “remote” geography

Step 3 – Staffing Models

When a branch type is considered for a specific location, layering a Staffing Model is the next step.

Based on the branch type, total volume of employees can be calculated based on square footage, assumptive traffic patterns, as well as product and service mix.

Staffing specialties to consider are Universal Tellers, as well as Mortgage, Investments, etc. based on the needs of the customer/member in that area.

Step 4 – Technology Models

The final component of a Hub & Spoke model involves the technology and equipment needed to fully execute a branch type. Considerations here are ATM’s, ITM’s, Cash Recyclers, Digital Signage, among others.

Developing your Hub & spoke model

While the four steps outlined above are presented sequentially, their considerations actually should be viewed more as a variable matrix.

Knowing how all the elements intertwine is one thing, but understanding how to execute a Hub & Spoke model, specifically when the disparate parts make up a proforma to aid decisions, is an entirely different task.

Lucky for you, LEVEL5’s Strategy and Site Selection departments do this every day.

If your Bank or Credit Union is in need of a full branch assessment and right-sizing for a fully formed, well-executed Hub & Spoke retail branch model, you deserve to contact LEVEL5 today.

Entering a new market

When assessing growth plans, and following the methodologies outlined in our recent Branch Playbook, you should have a clear understanding of how important data is when making market expansion decisions.

A proper Branch Playbook dives deeper into the geographic components that make up Market Analysis.

Data de-risks growth decisions, and is a critical element of expanding into a new market.

Enacting growth strategies by opening branches in a new market is not as simple as pointing to a map and building a branch. The days of building a new branch in a “busy” area of town just doesn’t cut it.


The right data not only informs these decisions, but gets you beyond generalities and into the specifics you and your Board need to greenlight projects and get you on the right growth path.

When it comes to data, LEVEL5 calculates and delivers an in-depth proforma that reviews variable data points across a 10-year horizon.

Below is a rundown of the critical data components that inform the proforma and aid your geographic expansion plans:

  • Loans and Deposits Forecasting – Likely the most important component when assessing the Data Outputs, when assessing expansion geographies and specific Trade Areas, you need to understand the “elbow room” in that market, i.e. are there still Loans and Deposits to be had, or is a given Trade Area saturated, and thus not viable
  • Competitive Analysis – Speaking of “elbow room” – is there an opportunity for you as a new retail banking entrant into a given market or not? Going beyond the elbow room, do the competitors in that given market dominate and/or outspend you, or will your entry be well received?
  • Consumer Overlays – A critical factor in geographic expansion is answering the question of how many of your existing consumers live in this expansion geography. Having a pre-built consumer base is often an important component  
  • Demographic Tapestry Profiles – You may know exactly who your consumers are, but do those consumers live in the next town over. Consumer demographics can shift greatly within only several miles, so understand the overlays of your existing base in expansion geographies
  • Market Potential Indices – The MPI measures the likelihood of adults in a given geographic area to exhibit purchase behaviors based on certain banking products and services that align to your offerings (or those you plan to introduce)
  • 4 Square Quadrant – The final component of the LEVEL5 Market Analysis engine is the delivery of a 4 Square Quadrant reading of a host of proposed branches in a given Trade Area by scatter-plotting them based on the branch performing well or poorly, and cross sectioned with the market potential being good or poor

To learn more about LEVEL5’s Strategy division and our unparalleled Market Analysis, contact us today so we can begin the assessments needed to help you grow the right way.

Data Points the Way

Using data to make informed decisions is nothing new. We’ve seen (or at least heard) the stories of mega e-commerce platforms that know what and precisely when to deliver us ads on things we didn’t even know we needed. Sports leagues use data to determine the value and output of a player beyond what a scout can see with the naked eye and thirty years of industry experience.

When it comes to informing your Branch Playbook (download here), and determining the right methodologies and decision, you need to have the right access to data (and likely the right partner).

LEVEL5’s approach to Strategy and Market Analysis goes beyond the traditional “consulting” engagement of other firms. Firstly, Market Analysis and the data does not live unto itself, we pair it with Site Selection.

While traditional firms will tell you a market area is viable, we take the data and hand it off to our Site Selection department to determine actionable properties. What good is data pointing to a broad section of a map if there is nothing actionable.

To further understand how LEVEL5 does Market Analysis, we have broken out the data components into two broad categories, with four sub-sets in each.

The first four components of our Market Analysis represent the critical INPUTS that fuel our proprietary algorithms.

  • Data Points – We begin by feeding the data engine with proprietary data points exclusive to LEVEL5, as well as data points exclusive to you, the Financial Institution
  • Staffing Interviews – Our Strategy team conducts a series of staff interviews, both qualitative and quantitative, which are then gathered and computed into the overall input engine
  • Market Segmentation Analysis – Geographic assessments are conducted over a defined area to include currently existing footprints and growth areas, which include competitive analysis, current consumer overlays, population densities and growth trajectories, demographics and product propensities
  • Trade Area Analysis – The final layer is a further drill-down at the geographic level, determining a several square block radii with viable, actionable properties

The second phase of a data-rooted Market Analysis effort is the OUTPUTS.

  • 10 Year Proforma – LEVEL5 delivers a 10-year proforma on a specific branch’s performance over a 10 year period with several variable factors, giving you visibility into the break-even point, loans, deposits, and Return on Investment (ROI)
  • Branch Type Model – One of the key variables to the 10 Year Proforma is branch type, with the modeling allowing for plug and play entries for free standing, storefront, and micro branch types, among others
  • 10 Year Staffing Model – Staffing, and their inherent costs greatly impact the model of a branch’s performance, with entries allowed for number of staff and staff types (salaries/costs)
  • Technology Needs Assessment – Technology, whether it be banking equipment and/or digital signage are an important capital cost consideration into your overall branch growth decisions

If you’d like to learn more about how LEVEL5 approaches data differently, and can give you the visibility into your growth potential and help you de-risk decisions, Contact Us today.

Crystal Ball 2022: The Full Series

For those who have read the entire series thus far, or for those who may have missed a week, but are looking for a consolidated version, this is the version for you.

Below, we present our combined 4-part Crystal Ball 2022 series.

Part 1 – Costs Continue to Rise

While indicators seem to be pointing to a “recovery” from the pandemic, such as employment rates, and even total cases per day/month, one of the lagging hangover effects that has not begun to ease are construction costs.

One of the impacts of the pandemic, foreseen or not, was the spike in construction across the board, both residential and commercial.

As seen with the below graph from the U.S. Bureau of Labor Statistics, costs of materials have not only spiked, but are also the highest since World War II.

Regardless of prices, this has not translated into construction projects being put on ice – quite the opposite.

Never have so many construction input costs risen so fast at the same time.

Cranes are flying over downtown skylines, and residential neighborhoods are replete with both new homes, remodels and extensions.

So what does this all mean for a Bank or Credit Union who is looking to grow, and looking at the branch as a main driver of this growth?

It comes down to a matter of investment.

While it may cost “more” to build a branch compared to pre-pandemic cost structures, if it’s growth you seek, and it can only/mostly be done via new members bringing in new Loans and Deposits via a new branch in a new Trade Area, you have to ask yourself if it’s worth the investment.

Wayne Gretzky famously said, “You miss 100% of the shots you don’t take.”

In banking growth terms, this quote can be translated into the simple economic situation of needing to invest to grow, or, “you have to spend money to make money.”

Material costs are predicted to rise, or stabilize at least through the first half of 2022, but what is the trade off of NOT doing anything? How can you value being stagnant, and how do you justify to the board to sit and wait for an unknown “cost” future?

The reality is, for a Bank or Credit Union looking to grow, you act now.

So, how do you counterbalance higher material costs for optimal margins?

Economies of Scale

Typically, when LEVEL5 begins a client engagement, the discussion of a branch is never singular, it typically involves 2 or more branches, even if the schedules for the builds is over a 12-36 month period.

If the plan is to indeed design and build more than one branch, buying the raw materials in advance will yield savings, and aid the overall margin.

Labor Discounts

Deals on labor can be had when multiple projects are happening either concurrently, or successively.

As the General Contractor, LEVEL5 has existing relationships with different Trades (sub-contractors) across the country, and have had success in booking these Trades for multiple jobs. This aid the sub-contractor, who can keep their workers engaged for longer.

Real Estate/Site Selection Transactions

LEVEL5 has been acquiring land and buildings for clients for over 20 years. In doing so, we veil your identity during the negotiation phase. The reason this is important is because in doing so, we have more negotiation power, and often save our clients up to 18% on the transaction price – helping your bottom line.

Time is Money

The other benefit of working with LEVEL5 when it comes to overall cost is the savings you’ll get from working with a proven national General Contractor. In today’s economic climate, the supply chain is compromised and there are labor shortages – both of these typically mean that a standard construction job inevitably is going over on schedule – and added time is added money.

We have been successful in queuing up work well in advance, which is why we subscribe to the “Design-Build” philosophy, not Design-Bid-Build.

Design-Build forecasts materials and labor during the planning stage. When things are known and predicted up front, plans can be made, and money can be saved.

Part 2 – Supply Chains & Trades Issues

While the pandemic seems to be drifting away, at least in its economic impacts, construction materials supply chain problems and availability of Subcontractors will continue to remain a challenge to credit unions and community banks looking to open a new branch in 2022 or 2023.

A critical component to executing a Branch plan is to have the right partner on your side. 

Advance Planning, Advance Savings

During the past 2 years, more and more of LEVEL5’s clients have been opting for advance design and planning of multi-year, multi-branch rollout strategies for their prototype branches. We believe this is happening largely because the antidote to such an unpredictable construction landscape is predictability that translates into advanced planning with the benefit of cost savings.

So how does working with our team help you plan for the future and reduce your spending? 

Establishing a supply chain means that you have a defined product to execute upon. Let’s use a branch prototype as example. Once you’ve worked with LEVEL5 to design and finalize your prototype, this means that you’ve already specified materials needed for the majority of your branches. At this point, our team can work proactively with different manufacturers, subcontractors, suppliers for furniture, equipment, fixtures and so forth. 

This advanced heads-up will give our sourcing partners an upfront and predictable way of understanding allocation needs. It will in turn helps to bring down prices for you.  

The Design-Build construction method allows you to make material selections based on current availabilities. We factor this in with you in the design process.  

Conversely, in the Design-Bid-Build process, a stand-alone architect designer may not be as privy to current materials costs in the design stages. Not being able to account for fluctuations here can result in unexpected costs once bids are turned in. 

Think of the saying “knowledge is power.” In this context, we’re talking about the knowledge of future needs. It is a power that keeps costs down for your financial institution.  

As you can see, advanced design and planning of rollouts can certainly drive down cost. 

Knowing Costs Now Helps You Make Better Business Planning Decisions 

To your advantage, you have an annual business planning cycle that needs to be built on sturdy information.  

Once your professional credit union and bank consulting is complete, you’ve decided on the prototype and strategy. Then, we supply you with an accurate price estimate on your new branch or branches. 

Having an accurate estimate now takes a huge unknown out of your organization’s plans, giving you more assurance and realistic scope of your budget. It also allows you to make effective projections and preparations for changes in personnel at varying locations.  

Secure Necessary Subcontractors Amid Shortage & Strain

Subcontractor labor shortages have been an issue even before the pandemic. Think all the way back to the great recession in 2008. But now, it’s become even more strained due to the aftermath (or continued impact) of COVID-19.

Because of these circumstances, the ability of your General Contractor to secure the right kind of Subcontractors for your project will only become more difficult the longer you wait to get things started. Less time to plan ahead and communicate properly with Subcontractors on their availability can cause obvious hurdles for your goals.  

This goes for both singular branch builds and multi-branch rollouts. However, we want to note that Subcontractors will be more aggressive sometimes. For example, bidding and staffing for projects that are part of an integrated/multi-location rollout will be aggressive. A one-off branch project will be much less so.

Regardless of the branch rollout volume, you can see how moving forward with long-term action now will put you in a preferable spot. It will minimize unknowns in both project staffing and pricing.    

Don’t linger too long when making growth decisions – icould cost you greatly in finances, stress, and timeline goals for your bank or credit union. 

Part 3 – The Branch Lives

Gone are the days of industry commentators preaching “the branch is dead!” and gone are the talks of moving to solely digital platforms (we hope, we think, but probably not).

Long live the branch!

Let me explain:

The Surprising Aftermath of an ongoing Pandemic

Long ago, in the ancient days of 2018 and 2019, the percentage of people using branches was declining. In 2010, 83% of people surveyed said that they visited bank or credit union branches at least once a month. That number steadily declined to 70% and 69% as mobile and online banking steadily increased.

Everything changed when the pandemic hit. For a brief time, branch use obviously hit an all time low as the whole world shut down. Then, the strangest thing happened. As the world hesitantly began to open back up, as stimulus checks were sent out, as FDA-approved vaccines rolled out, people stepped back out into the sunlight. People not only started visiting branches again, but they started visiting them even MORE than before. In 2020, it was reported by the Fiserv company, Raddon, that 77% of consumers went to a branch at least once during the pandemic.

Despite the health risks of going in public, despite business shutting down, and despite the convenience and rise of mobile and online banking on top of all of that, the branch prevailed. People WANTED to leave the house and go interact with other people. People craved that human interaction.

The New Branch

Now, don’t get me wrong, digital banking is still rising and will continue to rise. But the rise of digital does not have to mean the death of the branch. They are not mutually exclusive. In fact, for either of them to work to their fullest potential, they must support each other. While mobile banking rises, brick and mortar will also rise. It might not be the traditional physical building that you’re used to, but it’s a physical building nonetheless. There’s a new branch in town.

Your branch locations must be used to fill the gaps that mobile leaves. This means the human element to branching is imperative. When a modern-day consumer walks in the branch, their first touchpoint should be a human one inquiring about their needs. After that, they can move either to the transactional zones of the branch or the advisory.

We’re finding more and more that people are coming in less for the teller lines and more to sit down in a private office to talk to someone about their finances. Now, they want to walk in the branch, tell an advisor about their financial goals, and plan a strategy to meet those goals. They want to learn about the different types of credit card programs you offer and discuss which one would best fit their needs. They want to learn about your high-yield savings account and how to properly invest their money. Some of them are buying houses and want to know about their mortgage options.

Even if they do want a transactional process done, many times, they’ll head straight to the ATM’s or ITM’s. As popular as mobile has and will continue to become, you’ll never be able to withdraw cash from your phone. At a tech table, a consumer might want to use a tablet to go through the steps of opening an account. You might ask yourself, “Why would they do this at a branch when they could go through the same steps on their phones?” Well, it might seem the same, but again, that lacks the human component. if they wanted to open an account quickly on a tablet inside the branch, they would also be able to ask questions to the nearest teller about the different types of accounts and which of them best suits their needs.

Your consumers cannot have the same level of security in informed decision making from their couches.

Whatever reason the modern consumer has for needing brick and mortar branches, there’s no denying the existence of that need. The people have spoken and the branch is here to stay.

Part 4 – The Branch Strategy Shift from Transactional to Advisory

Last week, we predicted the importance and need for the branch in the year to come. This week, let’s talk about the why and how of it all.

The Shift is Happening

While it is true that the branch is indeed alive and well, it is also true that the branch we used to know and love has irreparably changed. A study done by Raddon right before the pandemic surveyed consumers on their branch preferences. The results showed that when it came to the older generations, they did prefer those traditional branch layouts with the teller lines and transactional components. It’s what they were used to and knew how to use. When it came to Millennials, however, the results told a different story. The study showed that Millennials preferred very technology-oriented branches, and/or the “coffee bar” model of branch.

The technology focused branch is the branch that you walk into to see digital screens around, displaying local news, the weather, the stock market trends, advertisements about products that the financial institution is offering, and events in the area. It holds interactive teller machines and a tech table with tablets for consumers to use for transactional needs. The rest of the branch, then, is for advisory offices and maybe a teller pod or two.

A Cup o’ Coffee for Your Thoughts

The “coffee bar” branch is the branch with an attachment of a Starbucks, a Peet’s coffee (if you’re Capital One Café), or a local café that the financial institution is partnered with. That’s the branch that you, as a consumer, can visit to enjoy a coffee and dessert while you take out a car loan or open a new account. It can be a convenient place for students to go to for financial advice or to begin the learning process for the upcoming adult responsibility of money. Then, they can stay for the coffee and snacks with peace and quiet while studying.

The existing Capital One Café is the perfect example of this. In order to be successful, these branches are conveniently located and strictly advisory.

Both branch types represent solutions to needs that mobile banking does not and cannot fill. Millennials are no longer those kids that can’t get off their phones. They are now financially independent adults with careers, families, and homes. They are now thinking about how they can move up in the world and this means investing their money, taking out car loans and mortgages, creating financial strategies, and even planning early for retirement. Properly designed advisory branches are the perfect (and only) fit for those needs.

A Strategic Plan First

Now, that’s not to say that every single traditional branch must be shut down immediately. You must root every decision in strategy. You must take a look at your branch network, target markets, and consumer demographics before making the decision of what type of branch you need in each area. The market surrounding a college campus would benefit a lot more from the “new” branch than the market surrounding a retirement community, for example.

Lucky for you, LEVEL5 has the leading Market Analysis team for Financial Institutions in the country. Our experts will evaluate the relevant data to draw conclusions and then align them with your strategies and goals. After that, we can come up with a game plan together and begin the execution.

Whew, that was a lot. But good stuff, right?

Contact Us today to discuss any items herein. We’ve been future-proofing growth plans for Credit Unions and Banks for twenty years, helping our clients grow at twice the national average. It’s time you work with LEVEL5.

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