Older savers are the fragile backbone of community banking's core deposits.
While banks have profitably tapped this market for years, the proliferation of investment and savings options is threatening the sector's funding base.
"It is a trendy thing to talk about stocks and equity," said Donald B. Taylor, president of FISI-Madison Financial, a Nashville financial marketing firm. "But the middle-class mature market is where the bank is making its money."
Some of banks' success comes from senior citizens' loyalty.
"This is a hard group to move," said Mr. Taylor, whose company offers financial products and advice to 4,500 bank clients, many of which offer packages for senior citizens. But a lack of service is one thing that will drive such people away, he added.
Today, American Banker begins examining the changing profile of community bank customers. This article focuses on how community banks attract and retain older customers. Tuesday's will explore the challenges confronting bankers courting the younger generation.
The U.S. Census Bureau reports that the average person from 55 to 64 years old has $167,588 of personal assets-the most in any demographic group.
Community banks use a variety of means to attract senior citizens.
Cattarangus County Bank, Little Valley, N.Y., offers free checking and safe deposit boxes to customers 50 or older.
"For seniors, we have free everything," said Salvatore Marranca, chief executive officer of the $95 million-asset bank. This policy gives the bank a cheap source of money to lend.
In addition to free checking, some banks attract senior citizens by forming clubs that cater to them.
Michael Barrett, an assistant vice president at Taneytown (Md.) Bank and Trust Co., said he has won customers through his Senior Club.
Elderly customers have come to his bank to open an account just to be included on his newsletter mailing list, he said. The publication discusses what is going on in the community and offers tips relevant to retirees.
The newsletter also is a vehicle for the bank to cross-sell products to its customers. Mr. Barrett said Senior Club members have an average of 3.5 accounts at the bank, thanks in part to product writeups in his newsletter.
Taneytown's senior-citizen checking accounts average a balance of $3,000, about double the bank's overall checking average. And because most accounts have direct deposit-including pension and Social Security payments-they are cheap for the bank to maintain.
Travel benefits also attract customers.
Community National Bank in Derby, Vt., has offered discounted trips to its senior-citizen customers to destinations like Alaska and Ireland. Customers older than 55 who maintain $10,000 in a certificate of deposit or $15,000 in a savings account are eligible.
Community National arranges its own trips, but others, including Interchange State Bank, Saddle Brook, N.J., contract through third-party vendors for nonfinancial perquisites.
Linda Osbuth, first vice president at Interchange, said her bank offers travel discount booklets, insurance products, and pharmacy discounts to older customers.
But in some markets, less extravagant tactics make more sense.
Mr. Marranca said his bank does business in a rural area where few senior citizens travel. He said he considered establishing a senior club but didn't think it would be worth the cost.
So instead of planning trips or publishing newsletters, he opens his lobby to informal socializing, offering coffee and snacks.
"You have to know your market," Mr. Marranca said. "Banking here is a social occasion."
