Key Benets

Platinum Overdraft (POD) 15 months following implementation 1.

the client achieved:
Signicantly improved revenue
Control of principal charge-offs to within 1% of revenue
Consistent application of payment rules to all accounts
Improved overdraft decision process
Greater operational efciency with a centralized decision and
communication process
Deposit Score 2. (DS) upgrade nine months following implementation
the client achieved:
18% improvement in Paid Items per Account
29% improvement of Waived Fees
Consistently managed risk at the account level
The Washington Trust Company
Background
Like many community banks, The Washington Trust Company (WTC) was looking for new ways to increase its
fee income and provide improved customer service. WTC was initially hesitant to change its systems due to the
regulatory landscape and the negative public perception of poorly run overdraft programs. Prior to the banks
implementation of SMS Platinum Overdraft solution (POD), multiple WTC departments managed customers
overdraft items, the process was subjective and inconsistent across its multiple branches.
The challenges that WTC faced are common among the many banks that offer an overdraft service on a large scale:
compliance, charge-offs, management of communication, customer service, and public policy, all of which must be
done at the highest levels of efciency, professionalism, and customer satisfaction.
Due Diligence
Washington Trust was looking for the right solution to appropriately manage risk, comply with regulations,
provide excellent customer service, and enable the bank to efciently manage public policy.
WTC chose the Platinum Overdraft solution from Sheshunoff Management Services due to several key criteria that
separate Platinum Overdraft from other vendors.
CASE STUDY
Financial Institution
The Washington Trust Company
Westerly, RI
www.washtrust.com
Asset Size: $2.4 billion
Implemented Solutions
Platinum Overdraft (March 2003)
Deposit Score (November 2005)
Client Objectives
Enhance customer service
Increase revenue
Consistent service to all account holders
Improve Risk Management and Compliance
Core Vendor
Open Solutions Inc.
Our greatest concern was risk
management and compliance with
regulations. We feel strongly that SMS
understands risk and that the SMS
program has been designed to comply
with the regulations more than any
other program that we evaluated.
Michael Rauh Jr.
Senior Vice President
The Washington Trust Company
At A Glance
A No marketing approach; SMS recommended WTC not mass market the program.
SMSs best practices and the fact that the Ofce of Trust Services (OTS) recommends SMS best practices in
their ofcial guidance.
PODs ability to communicate the right message at the right time to the right customer.
The ability to manage risk on each individual account and react accordingly.
Robust reporting that allows WTC to manage the program from the perspectives of compliance, public policy,
and line of business.
A Perfect Fit
WTC discovered that the benets offered by the POD program went beyond the banks initial expectations. The
ultimate driver in implementing a program was revenue, says Rauh. But we did not envision a program so robust
and easy to use.
With the POD solution, the bank was now able to automatically pay items up to a determined overdraft tolerance
and centrally generate all communications to account holders that used the service. Branch Managers were only
responsible for the decision to pay or return items above the overdraft threshold and no longer responsible for
monitoring these overdrawn accounts, resulting in greater staff efciency. Implementing the program improved
risk management, and WTC found that the return on the investment for this solution paid off. Customer satisfaction
increased, thanks to the consistency in payment of items when presented against insufcient funds, and branch
employees were freed to serve other customers needs. The service addressed the immediate needs of the bank, and
after experiencing the value of the centralized POD process rst hand, both nancially and operationally, it sought
to expand the service.
WTC implemented SMS POD program in 2003, and since that time the program has enabled the bank to better
serve its customers, manage risk, increase revenue, and streamline the process. Initially the bank only offered
the service to personal checking account customers. But due to the success of the program and the high level of
customer satisfaction it generated, the bank extended the service to its business customers.
The widespread success that WTC experienced after implementing POD is clearly seen in the nancial results of the
program. In just the 15 months following its implementation for personal checking accounts, the bank experienced
signicant revenue improvements. Principal charge off activity during this timeframe was held to within 1% of
net overdraft revenue. While the service aspect is not as easy to quantify, overall improvements were apparent in
customer satisfaction and operational efciencies.
Customer Service and Communication
The manual system the bank previously used to manage overdrafts consumed valuable employee time and since
it was subjective in its nature, the application was also inefcient. After implementing POD, WTC discovered the
benets of a structured, objective procedure for processing NSF items and communicating with account holders
regarding NSF matters.
Overall, our customers who enrolled in and use the program like the fact that they know their items will be paid, says
Rauh. Understandably, people sometimes make errors in their checkbooks. They know they can count on us.
The program provides for consistency in application of best practices for all types of checking accounts. It also helps
WTC identify troubled customers in order to mitigate potential negative consequences for the customer and any
nancial losses for the institution.
SMS trained our staff to clearly communicate the program policies to customers. By empowering the customers,
they are able to make informed decisions about their nances, and we are able to better manage risk and the
customer relationship, adds Rauh.
Targeted, specic, and direct communication is critical in managing a successful overdraft program. With a detailed
communication strategy like that offered by POD, the bank can communicate the right message at the right time to
customers. Typically, 90% of all overdrawn accounts will be brought positive within the rst 10 days following the
overdraft event. But now at WTC, according to Rauh, 90% of overdrafts are collected within ve days, proving that
the effective customer communication system offered by the POD solution has had a measurable and signicant
impact on repayment times at WTC.
Risk Management and Public Policy
With increased scrutiny from the OTS and other regulatory agencies, banks that offer overdraft protection services
must be above reproach in the manner in which these types of programs are offered to customers. Banks have a
duciary responsibility to provide services that are sound for both their customers and the institution, its employees
and its shareholders. This was a central concern for Washington Trust and a key factor in selecting SMS POD
program. Our goal clearly is to help those who have good intentions but have had something go wrong. The system
helps us make better decisions. We have a high degree of condence in the program, explains Rauh.
POD offers prudent management of an overdraft service through daily monitoring of each individual accounts
behavior patterns and reacting to negative changes in those patterns by reducing or removing the overdraft tolerance.
This management addresses public policy and minimizes the possibility of the customer getting into overdraft
trouble while also controlling risk exposure for the bank.
Continuous Improvement
Bolstered by the success of Platinum Overdraft, WTC decided to further enhance the existing program by extending
it to business accounts, including additional delivery channels, and implementing a new sophisticated tool called
Deposit Score

. As Rauh explains, Deposit Score

has given our overdraft program a dramatic boost. Not only

are we able to further enhance customer service by paying more items, but we are able to mitigate principal losses
by decreasing or eliminating overdraft limits when such risk factors as negative deposit trends are present. Without
Deposit Score

, we would not have been able to take our service to the next level.
With the implementation of Deposit Score

, overdraft thresholds are now automatically calculated on a daily basis.

If risk factors are detected, the thresholds are reduced or removed, thus controlling potential principal losses. When
those risk factors improve, the customers overdraft threshold is automatically reestablished. The scoring process
is based on objective account characteristics and applied to all accounts, both personal and business, ensuring
fair treatment of all deposit accounts. In the nine months following the Deposit Score

implementation, WTC has

experienced an 18.2% improvement in items per account and waived fees have decreased by 29.4%.
By utilizing sophisticated analytics Deposit Score

has the ability to score customers based on unique characteristics

and automatically increase or decrease overdraft limits based on any changes in those characteristics. Traditional
scoring models use factors such as average collected balance, number of overdraft items, and age of account
to determine the appropriate overdraft limit. The typical model tends to only allow limited tiers for an overdraft
threshold, such as $250 or $500. What makes Deposit Score

different from other programs is that it goes beyond

the stagnant traditional approach and dynamically evaluates the individual account holders setting on an ongoing
basis and adjust the overdraft threshold to an appropriate level. Unlike other models on the market that use only
industry standards to score an account, Deposit Score

starts with SMS best practice recommendations for the

scoring criteria and enhances the calculation with individual account deposit and overdraft trends. Using the unique
behavior of each account provides the ability to establish the right overdraft threshold at the right time for each
account holder. The analytics enable an institution to balance the objectives of controlling loss and increasing
revenue, thus maximizing overall protability.
A Great Partnership
Washington Trust Company ultimately found that SMS offered the best and most efcient program for its overdraft
protection needs with positive results across the board. We have done a number of projects with Sheshunoff
over the years. SMS is a professional organization with good values. This program exemplies these qualities,
concludes Rauh.
Sheshunoff Management Services
2801 Via Fortuna, Suite 600 | Austin, Texas 78746 | 1.800.477.1772 | www.smslp.com