Catherine D. Franzoni of Manasquan Bank in Wall, New Jersey, recently received a call from a businessman who had been referred to the bank by another client.
Franzoni, who is senior executive vice president and chief operating officer, arranged an appointment to meet with one of the $3.5 billion-asset community bank’s branch managers and briefed the manager on the potential client’s needs. When the new client walked through the branch door, staff welcomed him personally and were up to speed on what he was looking for.
That kind of one-to-one relationship building is a time-honored and unique strength of community banks. It still works in growing business and deposits, but it’s under pressure. The expanding field of financial services players and disruptive technologies is changing how customers view banking and finances.
Competing strictly on rates in the new landscape is a dead end, according to some community bankers.
“Anybody can go out and buy money,” says Rob Armour, executive vice president and chief innovation officer for $8 billion-asset BankPlus in Ridgeland, Mississippi. “That’s not the point. Deposit growth [goals have] to come from an asset-liability strategy for the bank.”
Corey Hammonds, chief operating officer and chief credit officer for $185 million-asset Citizens Savings Bank and Trust Co. in Nashville, Tennessee, agrees, saying it helps to know who your bank’s customers are.
“A bank’s got to be in tune with their niche,” he says. “If you’re in tune with the customer, you won’t get caught up in the rate race.”
Use technology to understand customers
Community banks have been adapting to the new deposit-gathering landscape by leveling up in technology that amplifies their relationship strengths. Data mining and analytics are proving effective in helping banks first get more of their customers’ wallets, then retain those customers and attract similar ones.
BankPlus partnered with OptimaFI to produce a detailed analysis of its customers’ needs and behavior. The company analyzes behavioral data and combines it with benchmarks from peer banks to provide insight into how a bank can grow its deposits. The right combination of products and services, balance history and account activity can be strongly predictive of what a customer segment will respond to.
With this analysis in hand, BankPlus made micro-targeted offers to customers that produced about 75% in new funds in the first year and a half. “That’s way higher than standard, traditional marketing results,” he notes. “It was a tremendous response rate.”
Rick Claypoole, president of SaaS solutions at OptimaFI, says this data-based approach enables bankers to determine how and to whom they can provide the best value.
“You’ve got to be [aware of] who’s driving value in your client base,” he says. “Who’s my top decile, who’s the bottom decile? You don’t want to close accounts or drive people away, but the fundamental starting place is how do I create value for each of those segments?”
Manasquan Bank takes a similar approach to data mining. There, an in-house team researches clients’ financial movements. Manasquan partners with Whale Analytics to compare its clients’ activity with those of other financial institutions.
“It’s very positive. We’re up $77 million [in deposits this] year to date,” says Franzoni. “We’re a little ahead of our budget.”
The Bank of Elk River in Elk River, Minnesota, has also seen good results with a targeted marketing strategy.
“We have targeted digital marketing that’s specific to identified demographic targets,” says Bill LaVigne, president and chief operating officer, who reports that the $710 million-asset community bank has a healthy loan-to-deposit ratio. “Instead of blasting a mailer to everyone in a 10-mile radius, we’re sending the right message to the right consumer.”
LaVigne adds that the bank prioritized simplifying the journey from clicking on an ad to entering the online account-opening platform.
“If it’s not simple, it dies,” he observes. “We’re connecting marketing to the operations side and making sure the process is as seamless as possible.” The bank uses MeridianLink for digital account opening, which connects to the bank’s core and tracks the marketing’s effectiveness.
These banks’ experiences show that data, used wisely, can deepen relationships. LaVigne says the data helps the Bank of Elk River communicate to customers that its team understands their needs.
“It’s about relating to people and sending an ad to people at a certain stage of their life,” he says. “It’s our job to identify where a potential customer might be in a financial needs journey.”
New finance products that win
New finance apps are proliferating like wildflowers, but OptimaFI’s Rick Claypoole tells banks to prioritize touching hearts over the newest, coolest apps. He suggests that targeting youth-oriented savings or checking accounts tied to parental accounts can be an effective relationship-building tool.
“If your message is we’re helping your children save money, you move from a transactions partner to a financial wellness partner,” he says. “That’s more powerful than some fintech tools. Cool apps are nice, but if you want to touch me emotionally, show me you care about my kids.”
BankPlus markets Greenlight, a money app targeted to parents and children, to its checking account holders. “Kids get debit cards, and it teaches them to be responsible,” says Rob Armour, executive vice president and chief innovation officer of BankPlus. “It’s helped us capture brand and market share.”
Manasquan Bank has launched “Start Up” checking accounts aimed at children. “We saw a need during the pandemic when we discovered that children at a very young age couldn’t use cash to buy their school lunch,” says Catherine D. Franzoni, senior executive vice president and chief operating officer. “We saw the need and created a debit card so that students could go to school and get lunch. As the child progresses, we have a mechanism in place to convert to regular [accounts with] debit cards.”
Engage employees, focus on relationships
To really drive deposit growth, however, these community bankers agree that the entire banking team needs to be engaged. “If the entire team is not bought in, it won’t work,” Hammonds says. He adds that Citizens has introduced an incentive program for referrals that is based on types of accounts, how long the account stays with Citizens and other metrics.
Armour says BankPlus made a concerted effort to communicate its deposit strategy to its customer-facing team.
“Our loan officers effectively became deposit officers armed with products we’d discussed internally,” he says. “This is paramount. Net-new money strategies only work if your employees are committed to enforce it. There is no analytics program in the world that can stop disintermediation of funds if your employees allow it.”
Indeed, retention is key to deposit growth, and this is an ongoing challenge for community banks. Mark Jacobsen, CEO of IntraFi, which provides reciprocal deposit services, points out how easy it is to move money with a smartphone these days.
“In a world where somebody can press a button, give power of attorney to a third party to make decisions for them and ignore deep connections because they haven’t grown deep enough in the individual, that’s got to be a real concern,” says Jacobsen.
Personal relationships with customers can be a critical backstop.
“Be a human being doing business with a human being,” says LaVigne. “If you can offer products that are competitive, the differentiator for the bank is, ‘They’ll be there for me.’”
Manasquan Bank schedules quarterly “Client Connect” days at local branches with retail and commercial clients. While attendees are treated to breakfast, bank representatives ask for suggestions or feedback. Franzoni says it’s an opportunity to get a good read on what’s important to clients and how to best manage those relationships.
“It’s a great forum for people to understand that we recognize everything’s not perfect,” Franzoni says. “We want to engage with a customer if they have a problem and find out how we can improve.”
Citizens Savings emphasizes its affinity with the community, positioning itself in the marketplace as a financial institution that invests more than 80% of deposits locally.
“If you have an inkling that you want to support a greater Nashville, you need to put your money in this bank,” says Hammonds. “Make it, ‘Where I bank is what I support.’”
As a community development financial institution (CDFI), Citizens Savings Bank also grows deposits through relationships with other banks that need Community Reinvestment Act (CRA) credits. Citizens gets a bank’s deposit in exchange for the bank getting a competitive rate and CRA credits. In the past, Citizens has promoted this program through bank-to-bank relationships, but it is gearing up with a regional marketing strategy to attract more deposits.
When purpose fuels deposit growth
Citizens Savings Bank and Trust Co., a CDFI in Nashville, Tennessee, is targeting partnerships with nonprofits in the rapidly growing area. The community bank is developing specialized products and services tailored to nonprofits’ specific needs, including cash management services, competitive rates and services targeted to their employees.
“We are reaching out to those nonprofits whose mission aligns with ours,” says Corey Hammonds, chief operating officer and chief credit officer for Citizens. “If we do it with the right messaging, that’s when we go get the consumer.”
One of Citizens’ partners is the Tennessee Higher Education Initiative (THEI), which helps incarcerated people get high school diplomas and college degrees. “The chairman of the board of THEI used to be incarcerated,” says Hammonds. “You start telling those kinds of stories to the greater area of Nashville, and that gets attention. That’s our unique way of driving deposits.”
Offer new, innovative products
Competitive products matter, of course, and adding new products can help with acquisition, retention and satisfaction. On the commercial side, community banks are expanding the services they offer business clients to stay competitive. Manasquan Bank will soon offer a new solution that includes accounts payable, accounts receivable, payroll, merchant services and other tools.
“We believe this is an enhancement that will make a difference for our small business customers that don’t have a fully integrated platform. It will make their lives easier,” says Franzoni.
The Bank of Elk River uses Banno business banking tools, such as cash management and a treasury suite. “We can help [customers] with invoicing, payments, merchant card acceptance,” says LaVigne.
Citizens Savings Bank recently launched a merchant services module. The software will produce internal financials free of charge to the bank’s business clients. “We want to make sure it’s a good user experience and a value-add before we promote it,” says Hammonds.
On the consumer side, bankers take more of a “show me” view of the proliferating apps and features, such as real-time budgeting, subscription management tools, rounding up and others.
“You have to assign some weights to the features, because 10 or 12 come out every year,” says Armour. “Some of these products are very new, so I look at whether there is a real ROI and if it’s definable.”
“Every consumer is different,” LaVigne says. “Some really love those features and apps, some don’t. I believe strongly that you can’t be all things to everybody. I look at it and ask if it’s something that’s being demanded by our customer base.”
Community bankers agree that the real value of many additional features is their “stickiness” in bonding customers more closely with the bank. “It’s more of a retention play,” says Armour.
Whether it’s through these newer services or other product innovations, IntraFi’s Jacobsen says banks should find ways to bundle products and features.
“You need to not just be a checking account but offer a bundle of services, such as budgeting software or a savings plan that comes with automatic enrollment,” he says. “Bundle those services so no one will be easily dissuaded from staying just because they see someone paying five basis points more on deposit.”
Overall, community banks are adapting and leveraging their strengths to stay competitive in a shifting landscape.
“We have much more personal relationships with our clients than do larger banks or fintechs,” says Franzoni. “We’re engaged in the community, and we have a lot of visibility. We try to continually enhance our digital platform to ensure that our clients have a good experience.”
Betting on branch expansion for deposit growth
The Bank of Elk River in Elk River, Minnesota, is betting physical presence still drives deposit growth. Currently a market leader in the suburbs west and northwest of Minneapolis-St. Paul, the community bank is opening a new branch next month in Andover in the northern suburbs.
“Once you saturate a market, it’s more difficult to grab market share,” explains Bill LaVigne, the community bank’s president and COO. He notes that it’s difficult to expand a bank’s footprint without putting a stake in the ground.
Being part of the community is the Bank of Elk River’s identity and brand. “We’re a part of your community, serving on your boards, donating to your schools,” he says.
LaVigne acknowledges the pros and cons of physical branches that have been widely discussed in recent years. “As an industry, we were over-branched, but the branch isn’t dead,” he says.
He points out that for many customers, knowing there’s a place they can come and talk to somebody if they need to still matters. The bank also eyes the efficiencies that size makes possible.
“Our goal is to be a billion-dollar bank and see where that gets us from a profitability standpoint,” LaVigne says. “We have to spread our wings and get into another growing community.”