Data Driven Expansion Decisions. Presented by Terry Johnson, Director Fiserv Advisory Services

Transcription

1 Presented by Terry Johnson, Director Fiserv Advisory Services

2 Growing your financial institution requires clear execution on a finite set of potential strategies. Expanding into new markets is a one of those key strategies. Entering a new market is a long-term decision with a material investment in time, money and reputation and impact on overall performance. Taking the time to invest upfront in a comprehensive data-driven analysis is essential to avoiding costly mistakes. In this session we will examine; Growth strategies Complexity of market expansion Expanding without a fact-based approach Different levels of market expansion analysis Best practices market expansion case study

3 Levers of Growth Finite Number of Levers to Pull for Growth 1. Organic 2. Take Away Market Share 3. Merge and Acquire 4. Market Expansion

4 Levers of Growth Finite Number of Levers to Pull for Growth 1. Organic 2. Take Away Market Share 3. Merge and Acquire 4. Market Expansion

5 Expanding Into New Markets Can Be A Challenge 3,141 there were 3,007 counties, 64 parishes, 16 organized boroughs, 11 census areas, 42 independent cities, and the District of Columbia for a total of 3,141 counties and county-equivalents in the United States. Which expansion county is the right next market for your financial institution? Source: USGS

6 Expanding Into New Markets Can Be A Challenge 11,078, ,740 there were over 11 million Census Blocks (average of 3,527 per county) and 217,740 Block Groups in the United States according to the United States Census Bureau. Even if you knew which County to expand into, what Block Group(s) in that County best meets your desired market characteristics and growth potential? Source: US Census Bureau

7 Expanding Into New Markets Can Be A Challenge Where in your expansion county is the right next market for your financial institution? Will the new market increase my growth potential? Are the customers similar to my most profitable customers today? How does the market saturation impact my ability to be successful?

8 Expanding Into New Markets Can Be A Challenge Of course, we could rely on intuition, collective wisdom, publically available data, and some ad hoc market information and make a decision on the new market you will expand into

9 Expanding Into New Markets Can Be A Challenge The downsides to this approach are many and potentially very costly; Acquisition of land Construction / Acquisition of Office Opportunity Cost of Being in a Less than Optimal Location (essentially lost ROI) Reputation Risk (Cost) of Closing Underperforming Location The decision to expand your market footprint is a longterm decision with a material investment in time, money and reputation and impact on overall performance. Taking the time to invest upfront in a comprehensive data-driven analysis is essential to avoiding costly mistakes.

10 Expanding Into New Markets Can Be A Challenge Our experience with high performing institutions indicates they use the right balance of market knowledge, business intuition and the relevant market data analytics for success. Avoids less than optimal performance Maximize opportunity for success in meeting goals Provides for fact-based answers and solutions Platform for unbiased, decisive decision making Start Apply Market Knowledge Use Business Intuition Apply Relevant Market Data Analytics S U C C E S S

11 Market Expansion Analysis Using a Data Driven Approach to Find the Right Markets

12 Delivering Data Analytics for Executives Turning Data into Conclusions & Recommendations BankAnalyst turns data into conclusions and recommendations Over 30 Data Sources Regulatory, Economic, Marketing and Financial Data analytics Process of inspecting, cleaning, transforming, and modeling data with the goal of discovering useful information, suggests conclusions, and supports decision making. Transforms Data Into Useful Information Conclusions, Recommendations, Decision Support BankAnalyst modules BankAnalyst Financial Financial Benchmarking BankAnalyst Market Market Growth Analysis BankAnalyst Risk Enterprise Risk Management

13 Delivering Data Analytics for Executives Turning Data into Conclusions & Recommendations BankAnalyst Market Quick Profile Project new market growth Every household (consumer) Every business (commercial) Including your market(s) Segment consumer market Segment commercial market Franchise projections Market regions projections Office projections Product demand projections How Clients Use Strategic plan validation Identify franchise growth potential Identify branch growth potential Intelligently allocate growth goals M&A candidate growth potential Expansion market growth potential New office growth potential Identify / exploit niches in markets Effective allocation of resources Build consumer prospect lists Build commercial calling lists

14 Market Expansion Analysis Service Levels Expand into a New County Block Group Level Analysis of County to Find the Optimal Location Data Only Online Report Scorecard Custom Scorecard Evaluate a Potential Office Location Evaluate a Specific Potential Office Site to Determine the Optimal Branch Location Data Only Online Report Scorecard Custom Scorecard

15 Case Study Market Expansion Analysis Using a Data Driven Approach to Find the Right Markets

16 Case Study Our case study FI wants to expand into Oakland County, Michigan 934 Block Groups 617 Competitor Branch Locations 67 Zip Codes = 1 potential block group to consider

17 Case Study Case Study FI Profile $2.8 Billion in Assets Operating in 3 Contiguous Counties to Oakland County, Michigan Current customer base is upper middle class to affluent (as measured in Nielsen P$ycle Segments) They identified the following objectives and goals for this market expansion

18 Case Study Market Expansion Goals and Objectives What is the Purpose event causing this analysis to be performed? We have exhausted our ability to further deepen the wallet share of our existing customers, and we hold a dominant market share in our present markets. We see market expansion as a viable means to meet our growth goals. Is the new market expansion focused on commercial or consumer or both. Further, is focus on loan generation or deposit generation or both? The market expansion will have a high focus on consumer loan and deposit growth. However, we understand the need to continue to grow our commercial market share in order to augment and fill in where consumer growth will fall short. Is there a specific niche you are trying to mine in the market (i.e. small business (commercial), consumer segments)? While we currently have a focus on the upper middle class and affluent segments in our current footprint we are interested in maintaining and increasing this focus in the expansion market. Have you set specific goals or objectives for deposit and/or loan generation from this office location? If so, please provide here. Our new markets must meet or exceed our current growth potential.

19 Case Study Executive Sub-Committee on Market Expansion has many questions which require answers Intuitively know where the pockets of population and growth are in Oakland County, but. Of the 934 block groups which are the top 10 for Consumer growth? Commercial growth? Will these block groups increase, or decrease, the growth potential of our institution? How does the number of households and growth rates compare to our current footprint? Are the consumers in these block groups similar, or different, to our current footprint? How does the number of businesses and growth rates compare to our current footprint? How does market saturation (competition) impact my ability to grow a new office? What should we expect for new loan and deposit growth?

20 Case Study To answer the 7 important questions of the Executive Sub- Committee on Market Expansion over 102,000+ current market data analytic points must be analyzed, scored, and summarized related to Oakland County, Michigan

21 Case Study Processing 102,000+ current market data analytic points on Oakland County, Michigan

22 BankAnalyst Market MGP per Office Defined Projected annual growth in new balances within a Defined Market Area (DMA), or Trade Area. Growth $ Divided by the number of competitive branch offices in DMA. Divided by Result is MGP per Office an annual equal share of the new growth per competitor branch within a DMA. Equals

23 Case Study Consumer Commercial Scorecard Metrics CONSUMER MARKET GROWTH Household Growth (%) Number of Current Households per Office Consumer Current Average HH Income Consumer Deposit Growth - MGP per Office Consumer Loan Growth - MGP per Office Our Baseline Scorecard Provides Essential Metrics to Measure; Size of the Market Roof tops per competitive branch in trade area Businesses per competitive branch in trade area Growth in the Market Projected 5 year growth in; Households in trade area Business Establishment in trade area Revenue Growth of Business COMMERCIAL MARKET GROWTH Commercial Business Estab Growth (%) Number of Current Business Estab per Office Revenue Growth of Businesses Commercial Deposit Growth - MGP per Office Commercial Loan Growth - MGP per Office Types of Consumers in the Market Average Household Income Projected Equal Share of New Growth in Market Saturation of the Market in terms of Competition Consumer Deposit MGP per Office Consumer Loan MGP per Office Commercial Deposit MGP per Office Commercial Loan MGP per Office Data for Illustrative Purposes Only

24 Case Study Consumer Commercial Scorecard Metrics CONSUMER MARKET GROWTH Household Growth (%) Number of Current Households per Office Consumer Current Average HH Income Consumer Deposit Growth - MGP per Office Consumer Loan Growth - MGP per Office Our Baseline Scorecard Provides Essential Metrics to Measure; Size of the Market Roof tops per competitive branch in trade area Businesses per competitive branch in trade area Growth in the Market Projected 5 year growth in; Households in trade area Business Establishment in trade area Revenue Growth of Business COMMERCIAL MARKET GROWTH Commercial Business Estab Growth (%) Number of Current Business Estab per Office Revenue Growth of Businesses Commercial Deposit Growth - MGP per Office Commercial Loan Growth - MGP per Office Types of Consumers in the Market Average Household Income Projected Equal Share of New Growth in Market Saturation of the Market in terms of Competition Consumer Deposit MGP per Office Consumer Loan MGP per Office Commercial Deposit MGP per Office Commercial Loan MGP per Office Data for Illustrative Purposes Only

25 Case Study Consumer Commercial Scorecard Metrics CONSUMER MARKET GROWTH Household Growth (%) Number of Current Households per Office Consumer Current Average HH Income Consumer Deposit Growth - MGP per Office Consumer Loan Growth - MGP per Office Our Baseline Scorecard Provides Essential Metrics to Measure; Size of the Market Roof tops per competitive branch in trade area Businesses per competitive branch in trade area Growth in the Market Projected 5 year growth in; Households in trade area Business Establishment in trade area Revenue Growth of Business COMMERCIAL MARKET GROWTH Commercial Business Estab Growth (%) Number of Current Business Estab per Office Revenue Growth of Businesses Commercial Deposit Growth - MGP per Office Commercial Loan Growth - MGP per Office Types of Consumers in the Market Average Household Income Projected Equal Share of New Growth in Market Saturation of the Market in terms of Competition Consumer Deposit MGP per Office Consumer Loan MGP per Office Commercial Deposit MGP per Office Commercial Loan MGP per Office Data for Illustrative Purposes Only

26 Case Study Consumer Commercial Scorecard Metrics CONSUMER MARKET GROWTH Household Growth (%) Number of Current Households per Office Consumer Current Average HH Income Consumer Deposit Growth - MGP per Office Consumer Loan Growth - MGP per Office Our Baseline Scorecard Provides Essential Metrics to Measure; Size of the Market Roof tops per competitive branch in trade area Businesses per competitive branch in trade area Growth in the Market Projected 5 year growth in; Households in trade area Business Establishment in trade area Revenue Growth of Business COMMERCIAL MARKET GROWTH Commercial Business Estab Growth (%) Number of Current Business Estab per Office Revenue Growth of Businesses Commercial Deposit Growth - MGP per Office Commercial Loan Growth - MGP per Office Types of Consumers in the Market Average Household Income Projected Equal Share of New Growth in Market Saturation of the Market in terms of Competition Consumer Deposit MGP per Office Consumer Loan MGP per Office Commercial Deposit MGP per Office Commercial Loan MGP per Office Data for Illustrative Purposes Only

27 Case Study Consumer Commercial Scorecard Metrics CONSUMER MARKET GROWTH Household Growth (%) Number of Current Households per Office Consumer Current Average HH Income Consumer Deposit Growth - MGP per Office Consumer Loan Growth - MGP per Office Our Baseline Scorecard Provides Essential Metrics to Measure; Size of the Market Roof tops per competitive branch in trade area Businesses per competitive branch in trade area Growth in the Market Projected 5 year growth in; Households in trade area Business Establishment in trade area Revenue Growth of Business COMMERCIAL MARKET GROWTH Commercial Business Estab Growth (%) Number of Current Business Estab per Office Revenue Growth of Businesses Commercial Deposit Growth - MGP per Office Commercial Loan Growth - MGP per Office Types of Consumers in the Market Average Household Income Projected Equal Share of New Growth in Market Saturation of the Market in terms of Competition Consumer Deposit MGP per Office Consumer Loan MGP per Office Commercial Deposit MGP per Office Commercial Loan MGP per Office Data for Illustrative Purposes Only

28 YOUR FINANCIAL INSTITUTION'S FOOTPRINT , , , , , , , , , , Data Driven Expansion Decisions Case Study - Results Of the 934 block groups which are the top 10 for growth? Market Expansion Analysis (MEA) SUMMARY SCORECARD MARKET METRICS Rank CONSUMER MARKET GROWTH Household Growth (%) H-L 0.33% 0.86% 1.23% 1.43% 0.80% 0.76% 0.93% 0.76% 1.33% 0.38% 0.51% Number of Current Households per Office H-L 12,082 17,972 19,835 15,445 19,515 18,962 18,219 14,689 15,572 20,026 18,878 Consumer Current Average HH Income H-L $ 65,367 $ 113,415 $ 110,460 $ 92,414 $ 106,948 $ 114,526 $ 109,286 $ 98,346 $ 93,523 $ 111,416 $ 76,542 Consumer Deposit Growth - MGP per Office H-L $ 950,824 $ 6,151,561 $ 5,549,843 $ 3,706,027 $ 4,549,737 $ 4,219,955 $ 3,779,767 $ 3,742,991 $ 3,710,860 $ 2,512,212 $ 975,225 Consumer Loan Growth - MGP per Office H-L $ 668,899 $ 4,143,355 $ 3,789,887 $ 3,129,229 $ 3,106,217 $ 2,731,328 $ 2,634,579 $ 2,640,911 $ 3,075,067 $ 1,595,371 $ 724,505 RANK Data for Illustrative Purposes Only

29 YOUR FINANCIAL INSTITUTION'S FOOTPRINT , , , , , , , , , , Data Driven Expansion Decisions Case Study - Results Will these block groups increase, or decrease, the growth potential of our institution? Market Expansion Analysis (MEA) SUMMARY SCORECARD MARKET METRICS Rank CONSUMER MARKET GROWTH Household Growth (%) H-L 0.33% 0.86% 1.23% 1.43% 0.80% 0.76% 0.93% 0.76% 1.33% 0.38% 0.51% Number of Current Households per Office H-L 12,082 17,972 19,835 15,445 19,515 18,962 18,219 14,689 15,572 20,026 18,878 Consumer Current Average HH Income H-L $ 65,367 $ 113,415 $ 110,460 $ 92,414 $ 106,948 $ 114,526 $ 109,286 $ 98,346 $ 93,523 $ 111,416 $ 76,542 Consumer Deposit Growth - MGP per Office H-L $ 950,824 $ 6,151,561 $ 5,549,843 $ 3,706,027 $ 4,549,737 $ 4,219,955 $ 3,779,767 $ 3,742,991 $ 3,710,860 $ 2,512,212 $ 975,225 Consumer Loan Growth - MGP per Office H-L $ 668,899 $ 4,143,355 $ 3,789,887 $ 3,129,229 $ 3,106,217 $ 2,731,328 $ 2,634,579 $ 2,640,911 $ 3,075,067 $ 1,595,371 $ 724,505 RANK Data for Illustrative Purposes Only

30 Case Study - Results How do the number of households and growth rates compare to our current footprint? Data for Illustrative Purposes Only

31 Case Study - Results Are the consumers in these block groups similar, or different, to our current footprint? Data for Illustrative Purposes Only

32 Case Study - Results How does market saturation (competition) impact my ability to grow a new office? What should we expect for new loan and deposit growth? Data for Illustrative Purposes Only

33 YOUR FINANCIAL INSTITUTION'S FOOTPRINT , , , , , , , , , , Data Driven Expansion Decisions Case Study - Results Sum of Ranks Worksheet Identifies top 3 block groups Market Expansion Analysis (MEA) SUMMARY SCORECARD MARKET METRICS CONSUMER MARKET GROWTH Household Growth (%) H-L Number of Current Households per Office H-L Consumer Current Average HH Income H-L Consumer Deposit Growth - MGP per Office H-L Consumer Loan Growth - MGP per Office H-L CONSUMER SCORE ONLY RANK Data for Illustrative Purposes Only

34 We started here. (934 Block Groups) Data for Illustrative Purposes Only

35 We ended here.. Next Steps 1. Select a Market(s) 2. Evaluate location(s) 3. Take Action Data for Illustrative Purposes Only

36 Summary Market expansion is a key growth strategy Entering a new market is a long-term decision with a material investment in time, money and reputation Intuition and ad-hoc market intelligence will get you only so far Data driven analysis takes the guess work out of your evaluation and provides unbiased results There are a huge number of data points to organize and analyze Having a proven and organized approach will greatly increase your opportunity for success

37 Market Expansion Analysis Service Levels Expand into a New County Evaluate a Potential Office Location The same approach applies to.. Block Group Level Analysis of County to Find the Optimal Location Evaluate a Specific Potential Office Site to Determine the Optimal Branch Location Scorecard Strategist Led Custom Scorecard Strategist Led Scorecard Strategist Led Engagement Custom Scorecard Strategist Led

38 Follow Up Questions Thank You! QUESTIONS? Contact: Terry Johnson, Director Fiserv Advisory Services