THE SUPERMARKET HAS AN important, but not exclusive, role in the distribution of financial services to America's households. It probably fits in somewhere between traditional branch banking, which is clearly shrinking in terms of the numbers and frequency of people using it, and telephone/home banking, which is clearly on the rise. There still is the need for people to go to the bank to exchange physical documents, to obtain change, and to make deposits. Therefore, the physical presence of a bank is still necessary. We're happy with our 25 supermarket banks. We have about 179 other branches. Our program represents the highest ratio of grocery store branches to a total branch system in the California market by far. Our program has continued to grow at a good rate in all stores. The profitability has been about what we expected. When interest rates were real low, the profitability was less than we expected but it's improving because there is a lot of deposit spread in the business.

ONE OF THE ISSUES WITH supermarket banking is that many banks don't go into a supermarket banking program with a clear perspective and set of objectives. Banks are changing their delivery systems from what is essentially a brick and mortar branch delivery system to a series of multiple delivery systems that need to work in concert. Most haven't thought through how supermarket banking fits into that overall structure. Because there is no clear set of objectives, you will probably see supermarket banking go in a number of directions.

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