In this year of the certificate of deposit, community banks are trying some new twists on some old selling strategies.

Toasters and other premiums are exhibiting some staying power after making a comeback last year. And maturity is a selling point as much as rate, though rate wars have broken out.

And many bankers said the once-popular step-ups or indexed rates are getting only tepid responses.

"When we go out with a new CD product, market it, and everything, we have found the market just says, basically, 'So what,' " said Edward Vega, chief financial officer of Financial Bancshares, a St. Louis holding company for five small banks. "CD's are a different animal than they used to be. You have to be really aggressive (on pricing) to get any real movement.

"That's why you don't get much play out of a new product,"he added. "If it really doesn't excite customers, it's no big deal. You can excite them just as easily with a six-month CD as you can with a fancy product."

Conversations with a the presidents and chief financial officers at various community banks suggest that the lusterless CD is back in vogue. Promotions and unusual terms can generate interest, but consumers are looking for bottom-line income, and they're looking for liquidity.

"For 25 years community bankers sold six-month CDs," said W. Timothy Finn, managing partner of Financial Management Consulting Group in Louisville, Ky. "With this last low-rate cycle they got away from that, because of CDs lack of appeal and consumer preferences. They got into weird-rate products, jump-up numbers.

Now, we're seeing banks go back into the market with a plain six-month CD and be very successful at it."

Take the nation's capital, home of some of the most fierce CD wars of the '80s, where the business pages were once filled with full-page ads of the latest rates.

Such days are long gone. Thomas Hoppin, president and chief financial officer of Century National Bank in Washington, says its still a competitive CD market. But he doesn't lose sleep thinking up new ways to buy money.

"There are two kinds of customers generally," he said. "There are those that shop for rates the same way they shop for discounted airline tickets. The others are interested in keeping a certain amount of money in liquid form, and that's the one that we go after. As long as they think the pricing is reasonable and in the market range, they don't mind.

"We're not going to chase rates all over the place. We want to keep it steady and fair."

Maturities are where most of the competitive action is, bankers say. For instance, Mr. Hoppin's Century National is considering offering CDs with higher-than-market rates but much heftier early-withdrawal penalties. The idea is to keep a certain amount of CD money in the bank more than six months.

"That's about the only thing we're considering doing right now in terms of new products," he said.

"People just don't want to go out long term," said Ron Aulkner, vice president of Tri-State Bank, Denver. "The biggest rate competition is in the 12-month to 18-month range, because that's the most amount of time people want to be locked in to a rate right now."

Mr. Aulkner said loan demand at $96 million-asset Tri-State is high right now. The bank has been having to meet or beat some of the higher rates. It's trying to push 3-year maturities.

"Our margins are shrinking a little bit because of this," he said. "But we have the loan demand."

Mr. Finn, a former banker who's consulted community banks in the Southeast on their retail and pricing strategies for 15 years, said community bankers shouldn't fear the short-term CD.

"A six-month to 12-month strategy is best," he said, because it provides the best chance for retaining deposits.

He said he knows of one community bank that is matching two-year rates on six-month CDs.

"We've got some clients who have inverted yield curves on their CD portfolio from following this strategy," he said. "But our analysis shows that its the cheapest, best source of funds."

He also said that the extras - toasters, sporting events tickets, discounted long distance service - are working better than ever.

"The premiums seem to have come back in a big way," he said. "And, yes, they work."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.