When William J. Ryan, president and CEO of Peoples Heritage Savings Bank in Portland, Maine, wanted to capture market share from competitors, it was not toasters or electric blankets that quickly sprang to mind as ideal premiums to draw customers into his branches.

Mr. Ryan thought of food. Or more precisely, supermarkets.

That's why the Portland suburb of Windham will soon be the home of a Peoples Heritage branch, tucked inside the local Shaw's supermarket.

"A few friends of mine in other parts of the country told me we were really missing something in supermarket branching," Mr. Ryan said in an interview recently.

Joining the Trend

Following a trend already established for a decade in the West and Southwest, Peoples Heritage and other New England banks are just starting to open branches in grocery stores. "There's definitely a trend developing in New England," said John Garnett, executive vice president of International Banking Technologies, an Atlanta-based company that helps banks set up their supermarket branches.

Boston-based BayBanks, Inc. opened a branch in February at a Super Stop and Shop in a Dorchester mall.

In Hartford, People's Bank of Connecticut operates three supermarket branches and intends to open four more.

Only a Smattering

Key Bank of New York opened a branch in a Buffalo suburb in December and says it plans additions in the future, according to a spokesman.

Opening branches in supermarkets isn't new. But in hidebound

New England, grocery store branches have been slow to materialize. Of the almost 2,000 supermarket branches in the country, New England possesses only a sprinkling.

That part of the country has lagged way behind, mostly because the plague of poorly performing assets in the late 1980s delayed any movement by banks to open new branches.

"Part of it, frankly, was due to the severe economic recession in the Northeast," Mr. Garnett explained. "Banks would have been ready to go if they had not been dealing with more crucial financial issues."

Renovations on the Rise

Mr. Garnett observed another reason for New England's slow migration to supermarket banking. "It primarily lagged because of the availability of locations within supermarkets. Historically, stores have been smaller in the New England states."

Hoping to increase their own customer base, New England supermarkets recently began renovating their stores or opening new ones to accommodate more services such as movie rentals, greeing cards, postal services, and now banking.

With its asset-quality problems under control, and Shaw's Supermarkets completed renovation of its Windham store, Peoples is "going after the market in a big way," Mr. Ryan said.

And it's probably not a moment too soon. With banks gobbling each other up at a gluttonous paces, small banks like $2.4 billion-asset Peoples desperately want to grow so their large competitors won't swallom them.

Peoples is counting on supermarket branches to help capture new deposits more easily and less expensively then it was able to with traditional branches.

As the only statewide independent bank in Maine, Peoples is trying to evade and compete with the likes of gigantic Fleet Financial Group, Providence, R.I., and Key Bank of Maine, a subsidiary of the mammoth Cleveland-based Keycorp.

Fleet is No. 1 in Maine, with about a 23% market share, while Peoples and Key Bank are second with 12% apiece, Mr. Ryan said. Peoples biggest advantage so far is that Fleet and Keycorp are based in other states.

"A lot of Maine people want to deal with a Maine bank," Mr. Ryan maintained.

As a suburb of Portland, Windham offers Peoples Heritagee a lot of customers who commute to Maine's biggest city. But to get that market share, Mr. Ryan knows he must think less like a banker and more like a retailer. "Location, location, Location," he intones like a mantra.

Hours Are a Plus

One of the advantages of supermarket branching is the ability to stay open as late as the store does, with the knowledge that there will always be potential customers within reach.

Mr. Ryan will keep his new Windham branch open from 10 a.m. to 8 p.m. on weekdays, Saturdays from 10 a.m. to 6 p.m., and on Sundays from noon to 5 p.m. These hours meet the needs of suburban commuters, he says, while traditional branches are open only from 8:30 a.m. to 4 p.m. on weekdays.

The Windham branch will be the first supermarket bank office in the state. It will offer all of the same services carried by other Peoples' branches.

But if this dramatic move into the grocery aisles is scaring the competition, People's rivals are doing a good job of hiding it. Key Bank of Maine's executive vice president and chief operating officer Michael McNamara seems particularly complacent.

No Rush to Join

Although Mr. McNamara doesn't brush off supermarket branches as a fad, and he acknowledges the battle for bank market share will continue to be intense, he is in no rush to join Peoples Heritage by the frozen food.

Key Bank of Maine is considering opening a supermarket branch too, but "we just haven't had that right combination of facilities and location coming together at the right time. It'll happen," Mr. McNamara said.

He noted that Key Bank has opportunities elsewhere in Maine, including Lewiston, Auburn, Bangor, and the state's capitol, Augusta, which remain without supermarket branches.

He said key Bank wanted to further study opening branches in supermarkets to determine how best to enter the business.

Expectations of Growth

In addition to the supermarket branch, Peoples is adding Sunday hours to seven of its traditional "brick-and-mortar" offices near shopping centers.

Mr. Ryan would not say how much he thinks the supermarket branch will increase his market share, but he estimated the new branches should increase his customer-base by 1,000 per branch.

One doesn't have to take Mr. Ryan's word for it. Consider how well Provident Bank of Maryland in Baltimore is doing with the seven supermarket branches it opened since October of last year.

The branches have captured nearly $10 million in deposits and booked nearly $2 million in loans, according to Marcia Goldman, a bank spokeswoman.

Lower Initial Costs

The reason supermarket branches have done so well is that 15,000 to 30,000 customers enter a supermarket every week, according to Mr. Garnett. The average shopper makes 2.2 trips to the supermarket every seven days, he points out.

Another reason supermarket branches are successful is that they cost less to start up. Supermarket branches generally cost one-fifth of what it costs to construct a traditional brick-and-mortar branch. Mr. Ryan said construction of a traditional branch in Maine costs between $600,000 to $900,000.

Like their counterparts across the country, New England banks will have to change their culture to succeed. No longer will loan officers sit behind desks waiting for customers tempted by free sets of baking pans or dishware to walk into the branch. Bank officers will go into the aisles and sell.

Sales Experience Valued

As a result, requirements for the job have changed. General sales experience is quickly becoming the credential of choice for supermarket bankers. Even though thousands of customers walk through a supermarket each day, they have food on their minds, not home equity loans.

To talk the talk and walk the walk that gets customers interested, Provident Bank of Maryland in Baltimore employs a former saleswoman from Talbots and a former window-blind salesman, according to Ms. Goldman.

"They're not the typical suit-and-tie banker," she said about the sales associates, who don aprons to blend into the atmosphere.

Promotions Play Key Role

Mr. Garnett insists that banks that take on this aggressive nature will succeed. He also said banks will have to market differently in a supermarket.

Supermarket branches should run advertising campaigns once a month, Mr. Garnett said. In April, Provident capitalized on the start of the baseball season by passing out pamphlets with headlines on them: "We've got your bases covered in home equity loans."

Mr. Garnett said every month there's one or two events to build a promotion around.

"Valentine's Day. Super Bowl Sunday. Thankgiving. You can be very creative in tying an event along with an incentive for shoppers to shift their banking business to your bank."

New Englanders are more known for their irritability than their quickness to change. But soon, the grocery list for a Yankee shopper may read: apples, paper towels, tomatoes, car loan.

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