Western Independent Banker - January/February 2009 - (Page 19)

By Mack Wood Deposit Growth and Branch Network Effectiveness Keys to Deposit Acquisition It is simplest to think of deposit growth as essentially a zero-sum game: an individual bank is only going to rapidly add lower cost deposits by beating the other banker to the potential depositor, capturing that business and retaining it. One method of increasing deposits is to acquire the competition. This certainly simplifies thinking about the problem, but may prove practical only for banks in the top 50 with their substantial branch and loan production office systems, national reach, and conceivable alternative delivery channels. What, then, about the 8,716 banks and thrifts operating in the United States that have significantly fewer options? Fortunately, significant deposit growth potential exists for these banks, if they employ the right methodologies. Strategies and Tactics for Growing Deposits In our view, the keys to successful, costeffective deposit acquisition include: • Aggressive marketing and promotion of deposit products and services. Merely opening a new office, offering internet account openings, or operating a 24-hour call center in an attractive market will not generate new business that maximizes deposit market share. In our judgment, the single largest impediment to deposit acquisition is a lack of name recognition, including insufficient market awareness of the banks’ products and services. • Achieving critical mass and avoiding a minimal presence. Scale economies and utilization efficiencies matter in capturing new business and operating a profitable bank. • Achieving a reasonable semblance of size in any market is critical. More offices in a smaller geographic footprint are almost always preferable to single office outposts spread across a larger region. • Allocating staff and establishing sales goals based on market potential. It is understandable that bankers strive for control of personnel expense by managing branch staffi ng, but it is likewise clear to us that the issue facing banks is not so much the quantity of bank staff as much as the disposition of that staff and the tasking of bankers to capture available business. • Identifying and focusing on the volume of business that should be developed given market potential. Less reliance should be placed on merely adding a percentage of last year’s results to set the goal for this year. This leads to the undesirable effect of embedded underperformance and rewarding the wrong sales force members for nothing more than having the good fortune to be in a good market. It is simplest to think of deposit growth as essentially a zero-sum game: an individual bank is only going to rapidly add lower cost deposits by beating the other banker to the potential depositor, capturing that business and retaining it. Western Independent Banker January/February 2009 19

Table of Contents Feed for the Digital Edition of Western Independent Banker - January/February 2009

Western Independent Banker - January/February 2009 Contents A Message from the President & CEO Managin Liquidity and Funding During a Recession Staying Liquid in a Time of Regulatory Sea Change Managing Liquidity in a Volatile Rate Environment Regulatory Outlook for Brokered Deposits Deposit Growth and Branch Network Effectiveness Turbo Charging Account Acquisitions FDIC-Insured Sweep Accounts Creating a Contingency Funding Plan WIB Service Corporation Report WIB Calendar New Members Index of Advertisers advertiser.com

Western Independent Banker - January/February 2009

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