R. C. Giltner Services Confidential How To Profitably Respond to the Walmart/AMEX Bluebird Card and Other DDA Alternatives August, Configuring and Marketing a Checking Account as a Companion Card

R. C. Giltner Services Confidential Agenda A Payments Approach to Checking Revenues Recommendation Prepaid Payment Card Services and Bank Strategy Next Steps Appendix: Walmart/Amex Bluebird 2

R. C. Giltner Services Confidential 3 A Payments Approach to DDA Revenues Service Charges on Deposits Banks < $10 Billion, While service charges on deposits are falling, “payments” providers like PayPal are growing revenues over 20% annually. Source: FDIC, PayPal, in millions PayPal Revenues

R. C. Giltner Services Confidential 4 A Payments Approach to DDA Revenues The “payments” revenue strategy is exploding. Scan & Pay

R. C. Giltner Services Confidential 5 A “payments” approach to segmenting and pricing transaction services is winning relationships and earning fees consumers willingly pay. –Financial institutions focus on “accounts,” which still provide settlement, but their undifferentiated value is at the bottom of the pack in the hierarchy of consumer payment methods, venues and management. –Payment providers create value by focusing on the use, context and experience of specific payments, such as where the payment occurs or the context of before or after the payment. –Use, context and experience segmentation of individual payments drives new revenue and value that often is in addition to an existing account. A Payments Approach to DDA Revenues

R. C. Giltner Services Confidential 6 Consumers pay more for products and services according to use, context and experience. Large $ % more Latte $ % More A Payments Approach to DDA Revenues

R. C. Giltner Services Confidential 7 Transaction account services must be segmented through the context of payment: avoiding overdraft fees, not overspending, spending control, shopping online, and ease of “handing” someone card money.. over 30% per year. A Payments Approach to DDA Revenues

R. C. Giltner Services Confidential 8 Recommendation We recommend establishing a checking account that behaves like a prepaid card to offer a “companion card” payment service. 1.Cross sell customers who want the prepaid option. 2.Attract accounts that want entry with prepaid option. 3.Provide account for small business/employers for direct deposit for specific employees where volume is not sufficient for Payroll card strategies.

R. C. Giltner Services Confidential 9 Capture 5% of existing accounts with add on companion card generating $100 in revenue. Acquisition benefit leveraging service as a “payroll” card for small business. Payments expansion: “fresh start” components for accounts on ChexSystems. Thwart inroads by Walmart and other prepaid vendors. Leverage Bluebird marketing for your benefit. Recommendation Payoff

R. C. Giltner Services Confidential Recommendation: Checking Account Configured as GPR Prepaid Card 10  Radio  :30 second ad on local stations  Print – short run in local publications  Horse Trader  Quill  Standard News  Howell County News  Summersville Beacon  Direct Mail

R. C. Giltner Services Confidential 11 What Is A GPR Prepaid Card vs a Gift Card? Gift Cards Buy card and put specific amount of funds on card. Works like a credit card/debit card except funds come only from amount “pre-loaded.” One time use only. GPR Prepaid Cards Buy card and put specific amount of funds on card. “Multi-account” credit card/debit card except funds come only from amount “pre-loaded.” Can re-load at merchants, direct deposits or through bank accounts. Understanding “Payments” Services vs Checking

R. C. Giltner Services Confidential 12 GPR Prepaid Card vs an Debit Card Only, Opt Out Checking Account GPR Prepaid Cards Buy card and put specific amount of funds on card. While “prepaid,” overages can still happen but no fees. “Multi-account” credit card/debit card except funds come only from amount “pre-loaded.” Can re-load at merchants, direct deposits or through bank accounts. Debit Only, Opt Out Checking Debit card only and “return all” so only access funds deposited. While “prepaid,” overages can still happen but no fees. Works like a credit card/debit card except funds come only from amount “deposited” Can deposit (“load”) via online banking transfer, branches, ATMs, or direct deposit. Functionally the same thing. Segmentation on Use, Context and Experience

R. C. Giltner Services Confidential For example, segmentation generates more revenue for the same product according to use. 13 $1.99 ($1.53 per oz.) Travel UseHome Use $4.99 ($.90 per oz.) Segmentation on Use, Context and Experience

R. C. Giltner Services Confidential Revenue is also a function of “context” and “the experience.” 14 Free Popcorn to All Our Guests When only $.50 more, the large is seen as the best value. Segmentation on Use, Context and Experience

R. C. Giltner Services Confidential Alternative DDA Marketing: A Companion Card: Use, Context and Experience Market “No overdraft fees ever.” Sell “Help manage your spending.” Manage risk and security. Protect your Online shopping. Have spending control while shopping. Have a card to hand to students, youth, the baby sitter, etc. that you control. “Load” with direct deposit, etc. 15 Bank DDA Marketing: A Bank Account No Use, Context and Experience Hear is another checking account with just a debit card. What’s different? Now balance your account and don’t think your online balance is accurate to make sure you don’t overspend or overdraft. Balance my account on a cell phone? Let me explain how you can “Opt out” under Regulation E to avoid overdraft fees. What is Reg. E ? You need to manage risk with your full bank account information. My risk? Be careful shopping online, or at risky merchants. Not shop online? Don’t let others use your debit card. Not parent, child, brother, sister, baby sitter…? VS. Segmentation on Use, Context and Experience

R. C. Giltner Services Confidential 16 Segmentation on Use, Context and Experience

R. C. Giltner Services Confidential 17 GPR prepaid marketing use, context and experience is growing 30%+ a year and penetrating all segments, serving over 10% of households. The Amex/ Walmart Bluebird card reflects this mass market strategy. Source: The Wall Street Journal Segmentation on Use, Context and Experience

R. C. Giltner Services Confidential 18 The benefits driving the growth of “prepaid” can be provided in a checking account: No overdraft fees ever. (73%)* (positions Reg E opt out as a benefit) Control over spending. (58%)* Retail access for loading. Second chance options where CheckSystems scores are low. “Community banks struggle to devise a 21 st century business model that accounts for changing consumer behavior.”* * Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012 Growth Drivers of Prepaid Card Services

R. C. Giltner Services Confidential Many specific uses are driving the explosive growth of prepaid use among checking account holders. 19 Growth Drivers of Prepaid Card Services

R. C. Giltner Services Confidential 20 Prepaid customers have a checking account. Growth Drivers of Prepaid Card Services

R. C. Giltner Services Confidential Overdrawing their account for liquidity services is the least attractive option for this customer segment. Growth Drivers of Prepaid Card Services

R. C. Giltner Services Confidential 22 Banks and non bank competitors are offering prepaid card alternatives, with large banks underwriting their own card and smaller banks partnering with a vendor. Growth Drivers of Prepaid Card Services

R. C. Giltner Services Confidential 23 Unlike prepaid card programs, a “Prepaid Checking” account allows the financial institution to keep all the account revenue and face no “prepaid” compliance concerns without partnering with a vendor. Source: National Community Investment Fund and Our Analysis, Card Revenue Only Growth Drivers of Prepaid Card Services

R. C. Giltner Services Confidential These accounts will add between $100 and $200 in added revenue per account. 24 Product Revenue and Financial Pro Forma

R. C. Giltner Services Confidential 25 Product Revenue and Financial Pro Forma This generates valuable contribution over the direct variable costs of $58 with the largely fixed costs of retail checking delivery.

R. C. Giltner Services Confidential 26 We would recommend expansion of “payment” services that could be added to any “account.” Product Expansion $13.95/mo.

R. C. Giltner Services Confidential Summary 27 We bring the key skills for a successful and timely, turn-key implementation: Understanding the “Payments” revenue opportunity. Product strategy definition. (bill pay?, ACH?) Product financial contribution and budget. Product system set up definition. Product expansion for ChexSystems accounts. Marketing guidance and templates. Executive and branch team training. Sales and operations training, sales script and roll out.

R. C. Giltner Services Confidential Appendix: Walmart and Amex Bluebird 28

R. C. Giltner Services Confidential 29

R. C. Giltner Services Confidential 30 The single most important competitors is now Amex/Walmart. Prepaid is now promoted as an alternative to checking accounts. Big retailer promotion and in-store availability is driving consumer interest. Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential The competitive challenge is significant. 31 Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential 32 Rich features include: direct deposit, online and mobile, checks, ATM access, sub-accounts. Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential 33 Bluebird Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential 34 Bluebird Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential 35 Bluebird Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential 36 Bluebird Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential 37 Bluebird Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential Bluebird 38 Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential Bluebird Fees 39 Walmart/Amex Bluebird Account

R. C. Giltner Services Confidential Bluebird “surcharge free” ATMs include our ATMs. 40 Walmart/Amex Bluebird Account