Passbooks and comfortable lobbies won't bring in the younger generation of bank customers, so some community banks are going after them with an aggressive sales strategy and Internet banking.

Though banks have succeeded in keeping the accounts of senior citizens, their children and grandchildren have turned to other investment and savings options. Today, American Banker concludes a two-part series by examining how community banks attract and retain baby boomers and their children.

Bankers say customers' financial needs are pretty much the same regardless of age. But younger customers are more likely to turn to Wall Street with their savings or a car dealer for a loan.

"It is a critical problem facing the banking industry," said Dale E. Pohlmann, president of $46 million-asset Ravenna (Neb.) Bank.

And bankers admit they are to blame. "We sat in our chairs and waited for customers to come to us," said Daniel L. Krieger, president of First National Bank, Ames, Iowa. "That doesn't work anymore."

To attract business, particularly from younger customers, bankers must become better retailers, Mr. Krieger said.

"People no longer think of the bank as the place to save money," he said. "We need people on staff who know about our products and know how to sell them."

First National sends in "mystery shoppers" who grade employees on manners and their ability to sell.

South Umpqua State Bank, Roseburg, Ore., has gone a step further, turning its branches into mini-malls to attract consumers who grew up going to the mall. South Umpqua offers not only bank services, but stamps, flowers, and a cafe that serves South Umpqua Bank-brand coffee.

Raymond P. Davis, president of the $260 million-asset bank, credits the new ambience for deposit growth. Since the program began in 1994, the bank has gained $70 million of deposits in a stagnant market, he said.

South Umpqua offers financial products in packages similar to value meals at a fast-food restaurant. A customer opening a checking account can add a credit card or a deposit box for a reduced price.

And tellers are told to suggest products instead of waiting to be asked. "We have to give people the message that we are here to help," Mr. Krieger said.

In addition to becoming better retailers, small banks need technology to offer the same convenience as regional competitors, according to Donald B. Taylor, president of FISI-Madison Financial, a Nashville-based bank marketing firm.

Salem (Mass.) Five Cents Savings Bank has used PC banking to attract customers from a much wider area than its north Boston base.

"We looked in our lobbies and saw what we had to do," said Michael R. Fitzgerald, senior vice president of the $1 billion-asset thrift. Salem Five's average customer was 65 years old, and its branches were in elderly neighborhoods.

The "virutal branch" the bank established in March 1995 has attracted 5,000 customers and $65 million of deposits. Salem Five now has customers in every state except Idaho.

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