Chicago Thrift Pitching 15-Month, No-Penalty CDs

A Chicago thrift company whose deposits have steadily declined in the past year is promoting a no-penalty certificate of deposit to bring in cash.

Deposits at Park Bancorp, the parent of Park Federal Savings Bank, slumped 3.4% from mid-1996 to mid-1997, when the thrift held $128 million of deposits.

"There's a lot of competition for deposits around here," said Richard Remijas, Park Federal executive vice president. "We have to find a product to separate us from the pack."

The 15-month CD has a 6% annual percentage rate and requires a minimum deposit of $5,000. Customers can withdraw all the money starting six days after deposit, but partial withdrawals are not allowed.

To help build longer-term relationships, Mr. Remijas said, the staff will promote the thrift's checking accounts and other services when customers ask for the CDs.

Mr. Remijas said he doesn't expect many customers to withdraw their money unless interest rates increase significantly. In that case, the thrift would offer higher-yielding CDs with penalties for early withdrawals.

"We think the risk is minimal in terms of the opportunities to meet some people who may be in a state of flux because of all the mergers and acquisitions in this market," he said.

Robert Rowe, regulatory counsel for the Independent Bankers Association of America, said community banks increasingly promote no-penalty CDs to attract deposits.

"It's a nice marketing technique," Mr. Rowe said. "If customers know they can get to their money, it gives them a little bit of comfort."

Park Bancorp also plans to use its no-penalty CD to lead into the introduction of a tiered money market account which will pay higher interest than the 3.35% the thrift now offers, Mr. Remijas.

But Jack Dickey, president and chief executive officer of Southwest National Bank in Weatherford, Okla., said banks should maintain the distinction between CDs and demand deposit accounts.

Mr. Dickey said customers like CDs because of the safety and the higher interest rates, so eliminating the withdrawal penalty will not bring in much new money.

"They should increase the interest rates they are paying," Mr. Dickey said. "That is what attracts the customers."

Although Park Bancorp has improved its performance in the last year, it had a dreary return on equity of 4.01% and a return on assets of 0.87% for the four quarters ended June 30.

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