Decoding branch performance: Gathering key insights to grow core deposits

How do you dig through all of your branch performance data to find the insights that will guide your strategic plan? How do you decide where to make investments that will yield the most growth in core deposits? We’ve found the best tool for understanding current branch performance and making strategic decisions is a performance-opportunity matrix.

The matrix is based on four quadrants and each branch is plotted in one of the four quadrants based on more than a dozen data points, allowing you to understand your overall network performance and where to make strategic investments.

What are the four quadrants? Let’s dive in.

Low performance & low opportunity

This may be the most difficult quadrant to face from a strategic perspective. In some instances, credit union executives waste time, effort, and capital trying to squeeze better performance from every branch—even those with limited opportunity for growth.

If you have a branch in this category, the best options may be to either close it down or relocate it. LEVEL5 worked with a client recently when they had an underperforming branch in a strip mall that had taken a downturn in terms of tenants since the pandemic.

In our analysis, we determined that the best investment would be to relocate the branch to a fantastic location close by. Their members gave them immediate positive feedback on the move and they’re now hitting all of their performance targets in terms of new members and growth in loans and deposits.

High performance & low opportunity

If any of your branches are in this quadrant, leave them alone! Or, if anything, do some work to understand how they are making the most of limited growth opportunity and implement any learnings across your branch network.

You can think of it as placing a “do not disturb” sign on these branches from a strategic point of view. If they’re performing well in this quadrant, leave them alone!

Low performance & high opportunity

These branches deserve as much investment as you can afford. A branch with high growth opportunity (based on demographics like population, population growth trends, and median household income) may be underperforming for many different reasons.

Take the time to evaluate the staff, review your product offerings, and fine tune the member experience from start to finish. This may result in the need for additional staff training, a branch refresh, or even a complete branch renovation.

A branch refresh leaves the bones of the branch intact while updating surfaces with paint, carpet, and other design enhancements. It can also include a technology overhaul that removes old-style teller counters and replaces them with more open, engaging consultative pods. If the overall flow of the branch is solid, a branch refresh is a great way to elevate branch performance and drive core deposit growth.

A branch renovation goes deeper, usually keeping the footprint of the branch the same but rethinking and reworking the entire floor plan and the flow of your member experience. It would certainly also include many of the elements of the branch refresh described above in terms of updating surfaces, design enhancements, and technology improvements. These kinds of changes make a big difference to how members and potential members perceive the branch.

High performance & high opportunity

This is the most important category in terms of making a strategic investment. A high performing branch that’s in a high growth opportunity location is the dream scenario! What are changes or additions you could make that would launch this kind of branch even higher?

You may wonder, “If they’re already performing well, why would we want to invest in them? Shouldn’t we try to improve low performing branches first?” The answer is simple—and it’s the most important takeaway from this article.

Calibrate your investment to the size of the opportunity

The level of growth opportunity for each branch is determined by many factors including demographics (some of these were listed above), competitor presence (or lack of it), and that branch’s current member base.

Your best performing branches are most likely to be in the best locations. These are the branches you should focus on, trying to squeeze every bit of core deposit growth from them. Since they’re doing well, invest the time with your team to analyze and understand why they’re performing well and then do whatever you can to maximize those areas.

We regularly advise credit union executives to make the difficult decision to close or relocate an underperforming branch. Sometimes, it’s easy to get drawn into a spiral of trying to turn a branch around when the potential growth opportunity doesn’t warrant that kind of investment.

Tread lightly when considering pouring time, energy, and capital into underperforming branches with little-to-no potential for growth. Always calibrate your level investment to the size of the potential growth opportunity. That’s a winning strategy for the long term.

For more about the Core Deposit Growth Trends and practical strategies to grow your credit union, download our white paper.