With consumers increasingly using non-branch channels, the role of bank branches is evolving. A panel of bankers from Wells Fargo, Umpqua Bank and BBVA Compass discuss the changing role of bank branches. What type of branches do we need now? How do we transition to new models?

1. Building Branch Distribution for
Tomorrow’s Reality
Peak Performance Consulting Group®
October 20, 2010

2. Page 1
Challenging times!
The issues:
Consumer behavior is changing
The role of bank branches is evolving
Economics of checking accounts has changed
The challenges:
What type of branches do we need now?
How do we transition to new models?

3. Introductions: our panelists
Jay Freeman
EVP, Sales Service & Development
Wells Fargo
Ric Carey
EVP, Community Banking
Umpqua Bank
Jeff Talpas
EVP, Retail Network
BBVA Compass
Page 2

4. Diverse expertise
Wells Fargo Umpqua Bank BBVA Compass
Distribution Reach 70 Million
customers (1 out of
every 3 US
households)
Pacific Northwest
(WA, OR, CA, NV)
Sunbelt region
(TX, AL, AZ, CA,
FL, CO, NM)
Branches (stores) 6,445 176 720
Recent acquisitions Wachovia Bank Evergreen Bank,
Rainier Pacific,
Bank of Clark
County, Nevada
Security
Guaranty Bank
Other Subsidiary of
BBVA,
headquartered in
Spain with
operations in 30
countries
Page 3

5. Consumers are changing: they don’t use branches
the way they used to
Page 4
Still the preferred channel
for most consumers and
small business
Transaction activity is
shifting out of the branch
 Fewer checks
 More direct deposit
and remote capture
Greater use of online
payment and debit point of
sale
Online bill payment and
Mobile payments growing
rapidly

6. Branch transactions are declining
Page 5
Monthly Transaction Volume
(Seasonably Adjusted vs. Trendline)
Peak Performance Consulting Group client data

7. Preparing for the future: gradually getting out of the
“checking” business
Check volume continues to decline in US: 39% of consumers expect to
decrease their check writing
UK has already set deadline for elimination of checks as payment mechanism
Page 6
Decrease
Significantly
19%
Decrease
Somewhat
20%About the Same
53%
Increase Somewhat
6%
Increase Significantly
2%
Expected Changes in Consumer Check Writing, 2008-2011
Source: Federal Reserve Bank of Boston Survey of Consumer Payment Choices, January 2010

8. Discussion Question
The historical role of branches has largely been defined by
transaction processing.
With check usage declining, how do you see the role of
branches changing?
Page 7

9. Bank branches on the decline?
First decline since 1995
Is this the “tipping point” or temporary due to bank consolidation?
Page 8
75,000
80,000
85,000
90,000
95,000
100,000
105,000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Total Offices: FDIC Insured Financial Institutions
Source: FDIC. Data as of June 30 each year.

10. Discussion Question
Some analysts are suggesting the number of bank branches
will decline dramatically. Are they correct? Do we still need as
many branches?
Page 9

11. Too many branches or still room to grow?
Differences in branch density driven by:
Self service channel usage
Cultural preferences for face-to-face
Branch formats: smaller, more community oriented vs. hub locations
Competitive environment
Page 10
0
200
400
600
800
1000
1200
Room to Grow? Bank Offices per Million Residents
Source: Bank for International Settlements, Peak Performance analysis

12. Discussion Question
(for BBVA Compass)
Spain has some of the highest density of branches/population
compared to other countries – but many branches are smaller,
more sales oriented and less transaction oriented. Does that
suggest that in the US branches may not decrease, but
increase in number?
Page 11

13. Future of branches: “Reports of my death are
greatly exaggerated”
Page 12
Branches aren’t dead, but traditional branches must evolve!

14. Discussion Question
If you had a crystal ball, what would the “branch of the future”
look like?
Page 13

15. Is “Minority Report” in our future?
Page 14
RBS Citizens Bank, Boston:
using motion tracking,
pedestrians can interact with
the display.

16. Discussion Question
(for Wells Fargo)
What is Wells Fargo’s approach to technology in the branch
network?
Page 15

17. Branch as community center?
Page 16
Umpqua Bank neighborhood store,
Portland, Oregon

18. Discussion Question
(for Umpqua)
How does the Neighborhood Branch concept work at
Umpqua?
Umpqua has a reputation for innovation. Can you describe
your Innovation Lab?
Page 17

19. The branch comes to you
Page 18
BBVA mobile phone
geo-location service
BBVA new ATM housing

20. Discussion Question
(for BBVA Compass)
In many countries, banks are further ahead in the use of
technology than their counterparts in the US. You’ve been
acquired by a bank headquartered in Spain, and have had a
chance to observe the landscape in Europe and other
countries. What do you think US bankers can learn from their
European counterparts, and vice versa?
Page 19

21. Transferring global expertise
Citigroup hires designers of Apple Stores to create new branch
prototype
Open 3 locations in Tokyo, expand to US and locations around the world
Page 20

22. Sometimes we just need simple solutions
You think you have security problems!
Page 21

23. On-line vs. physical distribution
Page 22

24. Discussion Question
Bank of America is experimenting with video kiosks to provide
service without staff. USAA continues to expand their
distribution without branches through consumer remote check
scan technology and their alliance with the UPS stores.
Will banks be like Blockbuster (tied to physical stores – just
declared bankruptcy) or will survivors be more like Netflix,
which has aggressively moved into technology based
delivery?
How do banks integrate traditional branch banking with new
channels such as mobile/internet/call center, etc?
Page 23

25. Changing face of the industry
Consolidation will continue, perhaps at an even more rapid pace
Page 24
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
FDIC Insured Institutions
Commercial Banks Savings Inst. Total FDIC Inst. (Forecast)
Source: FDIC, Peak Performance analysis

26. Discussion Question
As branches are closed (either due to a new round of M&A or
evolution of the model) how do we manage consolidation
without losing customers and share?
Page 25

27. Assets concentrated in a few, large institutions
Concentration of the U.S. Banking System
| Page 26
Source: FDIC
Red line represents the Gramm-Leach-Bliley Act (1999) which revoked restrictions of Glass-Steagall

28. What does this mean for community banks?
Page 27

29. Discussion Question
The big are getting bigger. How should community banks
compete in this new environment?
Page 28

30. Top Take-Aways: changing role of branches
Branches are still the key distribution channel, preferred by 68% of consumers
and small business.
Branches aren’t going away, but the model will evolve.
The branch of the future will have less emphasis on teller functions and more
emphasis on sales and service.
 Branches will be designed differently. They will be smaller, and fit into typical retail
footprints. There will be fewer free standing branches (less need for large branches
with drive-ups).
 Branches will be staffed differently. There will be greater utilization of universal staff
who can handle sales, service and transactions -- we won’t need as many tellers.
 Branch managers will need improved market management skills. Branches will be
more like sales centers than transaction centers, and this means greater micro-market
knowledge and calling skills to improve trade area sales penetration.
 Banks will implement tighter cross-channel integration with hub branches and call
centers, especially for expert support and customer advisory functions. Leading banks
are already experimenting with video conferencing and similar technologies.
 Successful financial institutions will have more robust front-line relationship
management technology to enable staff to deliver better customer service, stronger
profitable cross-sell, and achieve greater share of wallet.
Page 29

31. Page 30
Thank you!
David Kerstein
President
Peak Performance Consulting Group
512-607-6332
dkerstein@ppcgroup.com
www.peakconsultinggroup.com