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APPENDIX
What we know – Market characteristics
Outlook for US Banking industry is cautiously optimistic• Lagging growth due to economic uncertainty• Eurozone instability• Regulatory challenges• Increased competition for limited dollars
What we know – Market characteristics
• Loan growth in Community Banks has slowed overall but is showing slight increase for 2Q 2012
– Primary source of lending for small businesses and farms – 21% of the banking industry in terms of assets, community banks
with less than $10 billion in assets made 58% of outstanding bank loans to small businesses in 2011.
• Overall industry consolidation fewer banks hold more deposits
What we know – Bank Use
What we know – Market characteristics
What we know – Market characteristics
What we know – Market characteristics
What we know – Market characteristics
• Top five technology concerns:– Regulatory compliance is top concern– Data security – Systems’ availability and recovery– Fraud detection and mitigation– Managing the pace of technological change
What we know - Branches
• New branch performance has been modest – About half the median deposit volume of established branches
• In- branch transactions are down– 7600 per month vs. 10,200 in 2007, average decrease - 25%– Affluent areas down more than those in mass market or senior
heavy markets
• Yet, branch is still the dominant sales channel– 95% new accounts– Also preferred for buying products, financial advice, making
deposits and problem resolution
What we know - Branches
• Location convenience is number one consumer selection attribute
– 45-55% cite as number one reason for bank selection
• Branches are primary form of awareness building
• Advent of online and mobile banking does not make branches less important – just adds to consumer options for convenience
Customer Insight
What we know – Customer Insight
• Satisfaction is high or relatively high on all channels but mobile• Yet,
– 45% have changed banks – up from 38% YAG• 5% plan on it
– 58% have more than one bank – up from 49% YAG• 23% have three or more
– Fewer than 30% of satisfied customers go to their current bank for additional products
• Most say change for lower fees or higher rates – yet research indicates that is true only when there is general dissatisfaction
with the bank
What we know – Customer Insight
• Trust finally increasing– Although fewer than one in four Americans trust financial firms…– Overall 51% of customers say their confidence in the banking
industry has fallen, vs. 55% in 2011 – an improvement
• Trust in small community banks increased from 51% to 55% in the most recent quarter of 2012.
What we know – Customer Insight
What we know – Customer Insight
What we know – Customer Insight
• 68% would provide the bank with more personal information if it helped the bank in recommending a better account or service
• Only 42% believe the bank adapts products and services it offers as one’s financial needs change
– 41% aren’t sure
ONLINE AND MOBILE BANKING
What we know – Mobile Banking
What we know – Mobile Banking
What we know – Mobile Banking
• High number of smartphone users show a greater self-service propensity, for example with flight check-in.
• Among these customers, – 11% use smartphone apps– 5% use texting for mobile interactions; and– 6% use a mobile browser to access their bank
• Smartphone apps are used most frequently to – check account balances (74%)– transfer funds (47%).– 18 percent use a smartphone to make deposits.
What we know – Mobile Banking
What we know - Branches
• Branch closes outpaced opens in 2010, 2011– Yet net decline only 1600/118000-– The majority of those reductions were merger related.
• Fewer start-up Banks– 170 in early 2000, five in 2010 and 0 in 2011
• Yet, even in the recession, more institutions added than reduced branches
What we know - Branches
What we know – Customer Insight
What we know – Customer Insight
What we know – Customer Insight
What we know – Customer Insight
What we know – Customer Insight
What we know – Customer Insight
What we know – Online Banking
What we know – Online Banking
What we know – Online Banking
Move to multiple distribution channels • 38% exhibit a strong overall orientation to the online banking
channel• 18% of consumers meaningfully include mobile banking in
their financial interactions
OPPORTUNITY
• Need better cross-sell training– Median cross-sell ratio – 2.2 products per household – Half of all accounts are only one product
• Both stats unchanged in the past 15 years!– A customer who has one product will stay for about 18 months
• Two or more and the average jumps to 4 years• Three products- 6.8 years
– Forrester Research 2009 Report adults own 8.2 products on average but no more than 2 or 3 at any one institution
FIVE STAR BANK OPPORTUNITY
Look for additional ways to maximize revenue
OPPORTUNITY– Customer Segmentation
OPPORTUNITY
Sample segmentation analysis
OPPORTUNITY
OPPORTUNITY
• Develop more customer focused product and service offerings
– Transparent pricing and service options– Offer segmented levels of customer service– Move from multi-channel to omni-channel distribution– Make low-cost digital channels customers’ preferred choice
• Encourage customer self-service– Shift marketing from “push” to “pull”– Develop flexible loyalty programs– Prioritize investment on critical customer interactions– Use innovative technology to deliver the retail bank of the future– Maximize power of consumer advocacy
FIVE STAR BANK -OPPORTUNITIES
• Technology enabling lower staffing costs– Teller cash recyclers– One key safe deposit boxes– Video– Remote image capture– Computer advancements – size and efficiency
FIVE STAR BANK -OPPORTUNITIES
Checking Account Competitive AnalysisBank First Niagara First Niagara First Niagara First Niagara First Niagara Community Bank Community Bank Community Bank Community Bank
Account Type Pinnacle Plus Pinnacle Checking Choice Checking eChecking Student First Checking
Completely Free Checking
50 & Better Interest Checking
VIP Free Interest Checking
Wall Street Checking
Monthly Service Chg.
$25, waived w/min balance
$15, waived w/min balance
$9.95, waived w/min balance, or maintain direct deposit, complete 10 POS purchase transactions per month
$3.00 none none none none $8
Minimum Balance
$5,000 or $50,000 combined deposits, loans (excluding mortgages), credit card balances & investments
$1,000 or $25,000 combined deposits, loans (excluding mortgages), credit card balances & investments
$300 or $5,000 combined deposits, loans (excluding mortgages and credit card balances)
none none none none none $1,000
ATM Fees Unlimited free in U.S., unlimited reimbursement of other banks’ fees
Unlimited free in U.S., unlimited reimbursement of other banks’ fees
No fees at First Niagara ATMs, two free non-First Niagara transactions per month
No fees at First Niagara ATMs
No fees at First Niagara ATMs, five free non-First Niagara transactions per month
Did not disclose Did not disclose Did not disclose Did not disclose
Opening Deposit
$500 $50 $50 $25 $50 $50 $50 $50 $50
Key Features Tiered interest rates, free overdraft transfers, free cahiers checks, free checks, free annual financial check-up
Tiered interest rates, discounts on loan and line of credit rates with autopay, free checks, free annual financial check-up
Free first order of standard checks, unlimited check writing, choice of paper or electronic statement
Unlimited check writing, monthly eStatement
Free debit card, monthly eStatement
FREE Internet and mobile banking, unlimited check writing, no per check charge, customer purchases checks, ATM/Debit card available, free gift for opening acct.
FREE Internet and mobile banking, competitive interest, unlimited check writing, no per check charge, customer purchases checks, ATM/Debit card available, free gift for opening acct.
FREE Internet and mobile banking, competitive interest, unlimited check writing, no per check charge, customer purchases checks, ATM/Debit card available, free gift for opening acct.
FREE Internet and mobile banking, higher interest rates with balances of $2,500 or more, competitive interest if balances falls below $2,500, unlimited check writing, no per check charge, customer purchases checks, ATM/Debit card available, free gift for opening acct.
Checking Account Competitive AnalysisBank Five Star Five Star Five Star Five Star Bank of Castile Bank of Castile Bank of Castile Bank of Castile Bank of Castile
Account Type Type 1 Type 2 Type 3 Basic Banking Welcome Checking
Select Checking Plus Priority 55 Student Checking True Advantage
Monthly Service Chg.
None if write less than 5 checks per month and receive Estatement (50¢ for each check written in excess of 5)
$8.00, waived w/min balance OR receive eStatement AND have direct deposit, OR perform at least 12 Check Card transactions OR perform 3 bill pay transactions OR write less than 5 checks
$15, waived w/min balance OR receive eStatement AND have combined consumer deposit balances of $15,000 OR have combined consumer deposit and loan balances of $25,000 (with at least $5000 in deposits) OR perform at least 25 Check Card transactions
$3.00, waived if perform less than 8 debits per month (50¢ for each debit in excess of 8)
none $5, waived w/min balance
$7, waived w/min balance none $10, waived w/min balance
Minimum Balance
none $2,000 average ledger balance
$5,000 averge ledger balance
none none $1,000 $100 none $5,000 average combined deposits or $25,000 outstanding loan balances
ATM Fees No fees at Five Star ATMs
No fees at Five Star ATMs, four free non-Five Star transactions per month
No fees at Five Star ATMs, unlimited free non-Five Star transactions up to $2.00
No fees at Five Star ATMs
Foreign ATM transactions not free
Foreign ATM transactions not free
Unlimited free foreign ATM transactions
Unlimited free foreign ATM transactions
Four free foreign ATM transactions per month
Opening Deposit
Did not disclose Did not disclose Did not disclose Did not disclose
Did not disclose Did not disclose Did not disclose Did not disclose Did not disclose
Key Features First order of 25 standard checks free, free bill pay, no annual fee for Visa Check Card
First order of 50 standard checks free, 10¢ cash back for every Check Card transaction over 25, $10 credit toward safe deposit box, up to $5 credit toward each wire fee, free bill pay, free money orders
Interest bearing acct, free standard checks, 10¢ cash back for every Check Card transaction over 25, $20 credit toward safe deposit box, up to $10 credit toward each wire fee, preferred CD & installment loan rates, free bill pay, free money orders
First order of 25 standard checks free, free bill pay, no annual fee for Visa Check Cars
First order of 50 checks free with direct deposit or ACH credit, free Internet banking with bill pay, free True Rewards Visa debit card
Pays interest, first order of 50 checks free, free Internet banking with bill pay, free True Rewards Visa debit card
Interest bearing, free checks for life, free Internet banking with bill pay, free True Rewards Visa debit card
Free Internet banking with bill pay, free True Rewards Visa debit card
Free checks for life, pays preferred rates on savings and CDs, savings on mortgage application fee, discounts on home equity and personal loans, free Internet banking with bill pay, free True Rewards Visa debit card