Charter One Financial Inc., which converted from a thrift to a commercial bank charter just last month, says a deposit-gathering gimmick has generated $1 billion of retail and small-business deposits and $600 million of home equity loans this year.
The $38 billion-asset Cleveland company did this by keeping its 450 branches open for two extra hours on the third Tuesday of each month and offering special rates and bonuses on a selection of deposit and loan products, including free checking accounts, during the extra two hours.
The strategy is ironic, an analyst says, because such sales efforts have become a hallmark of thrifts lately but Charter One has done everything it can to disassociate itself from its roots as a thrift company.
"They are trying to drive a wedge between themselves and thrifts," said Charlotte Chamberlain, an analyst at Jefferies & Co. Inc. "They are adamant that they want to be thought of as a commercial bank, but they still use thrift strategies."
Many thrifts have been trying to reduce their reliance on deposits bought from the Federal Home Loan banks and on time deposits, such as certificates of deposit, and fund their lending operations instead by offering low-cost transaction accounts. Washington Mutual Inc., a Seattle thrift company that has cobbled together a national network of branches, hopes to raise $10 billion of deposits over five years through specially designed coffeehouse-style branches, Ms. Chamberlain said.
Mark Grossi, an executive vice president of Charter One, disputes the notion that its strategy is similar to those being employed by thrifts. The company has transformed itself over the years by diversifying its balance sheet, reducing the percentage of residential mortgages in its loan portfolio to 35%, and boosting core deposits to fund nonmortgage loans, he said.
"We've built a culture that is very, very different" from thrifts, Mr. Grossi said in a telephone interview.
The extra-hours program enables Charter One to focus sales and marketing efforts, and steal share away from competitors in local markets, Mr. Grossi says.
Jason Goldberg, an analyst at Lehman Brothers, says that 25% of Charter One's sales are completed during nontraditional banking hours and that 15% of its monthly sales are generated on these special sales days. "They have found innovative ways to gather deposits."
Charter One is using a combination of convenience and price to lure customers to its 450 branches for the "Prime Time Tuesday" program.
For example, during the extra hours on June 18 the company plans to feature special rates and bonuses on two interest-bearing checking accounts for customers who can keep minimum balances of between $1,000 and $2,500, a noninterest-bearing "Totally Free Checking" account, and home equity loans.
For small businesses, it is featuring a business checking account, a money market account, and small-business loans priced at prime minus 0.25%.
The special prices and rates for deposit products are available only to new customers, while the loan specials are available to new and existing customers. Rates change from event to event, the company said.
