Western Independent Banker - March/April 2008 - (Page 32)

Using The Reserve’s On-Balance-Sheet Sweep to Their Advantage continued business customers. The On-BSS also eliminated two key customer “dislikes”: receipt of the daily confirmations required by the repo sweeps, and the “rate confusion” created by the variation in the rates listed in the daily confirms versus the actual rates they were receiving. From the bank’s perspective, the OnBSS product and implementation process has proven to be a tremendously successful customer acquisition and retention tool. The bank didn’t lose a single customer in the transition process and increased the number of sweep customers from 100 to 150 in just one year. The WIB bankers responded to several questions regarding issues related to the On-BSS: How does the On-BSS compare with FHLB Advances? Are there any advantages? The three bankers felt the On-BSS held several advantages. First, there is no issue of collateral required with the On-BSS. Second, the On-BSS is more than an alternative, wholesale funding vehicle. It represents a bank’s core deposits and core relationships, all of which are unique. Third, from a pricing perspective, the On-BSS is comparable to FHLB advances. Does the On-BSS result in the cannibalization of a bank’s current deposits? All three concurred that cannibalization was a concern initially; however, through careful design of target triggers and rates and fair monthly fees, they were able to largely avoid this situation. To the extent that cannibalization occurred, it was within the high net worth individual customers. Indeed, the WIB bankers experienced the opposite: In the six months following implementation of the On-BSS, Barnes Bank nearly doubled its deposit balances, and 50 percent of that growth came from outside – new customers with new money! By pricing its On-BSS relative to local brokerage firms’ offerings, San Joaquin Bank has generated a very steady growth in that portion of the bank’s deposit base that typically would have gone to those firms. Why? The bank’s customers were getting comparable rate of return on and easy access to their funds with their local bank. 32 Have the banks experienced any regulatory compliance issues with the On-BSS? All of the banks have been through at least two examinations since implementing the On-BSS – State and Federal (compliance, safety & soundness) – and none have encountered any questions, concerns, etc., from the examiners. Niche Banking continued from page 28 holds or household income. Growth projections of these same variables are vital to identifying a niche with higher velocity than the aggregate DMA; and, • Determine Service Deficiency – Are there special needs of the identified niche that are not being met? Have other market competitors specifically targeted this niche? Identifying a viable niche through this process is an important initial step, but by no means does it ensure success. You must then customize your offering to the unique needs of the market segment. Developing that customization is best achieved by listening to the prospective customer. For example, if the identified niche is dental professionals then you must gain insight into their special needs. This understanding can help determine how technology, such as remote deposit capture, can enhance your offering. So, if you want to maximize franchise or shareholder value, avoid the masses through a focused niche strategy aligned with the higher velocity market niches. Which customer niches can help you outgrow the market? Could it be medical doctors, CPAs, wealthy seniors? The answer can be confidently determined by aggregating publicly and commercially available market data that affords you the ability to “listen to the marketplace” and develop a strategy supported by quantitative market data. Utilizing a decision tree decomposition of growth potential, based on those numbers, it’s possible to quickly identify strategic niches that merit pursuit and drive franchise growth. Steve Cotton is president and CEO of BancIntelligence , an Atl anta-ba sed company delivering online advisor y solutions to financial institutions. He can be reached at (678) 323-3220 or scotton@ bancintelligence.com. WIB-endorsed VIPs • ATM Network and Driving/Debit Card Processing First Data Debit Services/STAR Network • Bank Operations Profitability Consulting Profit Performance Group • Check Overdraft Privilege Pinnacle Financial Strategies • Check Printing Harland Clarke American Checks • Commercial Equipment Leasing BancLeasing • Competitive Market Intelligence Market Rates Insight • Credit Risk Management and Stress Testing Inmatrix • Executive & Board Compensation Analysis Equilar Inc. • Insurance for Community Banks Independent Bankers Insurance Services • Insured Deposits/Funding for Community Banks The Reserve • Internet and Network Security Services SecureWorks • Loan Portfolio Tracking/Insurance for Lenders and Customers Kesler Associates • On- and Off-Balance Sheet Sweep Accounts The Reserve • Surcharge-free ATM Network MoneyPass • Workers’ Compensation Self-Insurance Group for California Banks WIBSIG www.wib.org Western Independent Banker http://www.wib.org

Table of Contents Feed for the Digital Edition of Western Independent Banker - March/April 2008

Western Independent Banker - March/April 2008 Contents A Message from the President & CEO The Forest Through the Trees Differentiating Your Bank Through the Five Senses 51st Annual Conference for Bank Presidents, Senior Officers and Directors Building Franchise Value Deposit Gathering Steps to Determine ROI on a Successful Brand Want to Improve Customer Loyalty? Managing the Change Your Bank Needs to Grow Ten No-Fail Strategies to Create Profit-Rich Growth Niche Banking Rethinking ROI Using The Reserve’s On-Balance-Sheet Sweep to Their Advantage WIB Calendar Welcome New Members Index to Advertisers Advertiser.com

Western Independent Banker - March/April 2008

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