GNA Corp. is scaling the community bank market one bankers' bank at a time.
The Seattle company recently signed its third bankers' bank in three years. GNA will help its new client, United Bankers' Bank of Minnesota, offer mutual funds, annuities and related sales support to its member institutions.
GNA has already signed 31 of the Minnesota group's 500 customer banks, and expects that number to grow.
Bankers' banks are cooperative organizations, typically formed by state bankers' associations, that provide a range of support services to member banks. Small banks dominate the membership rosters, because banding together with other institutions in a bankers' bank gives them buying power that they would otherwise have difficulty attaining.
GNA also counts as its clients the Independent Bankers' Bank of Florida, and the Bankers' Bank of Wisconsin. The company is courting some of the nation's 13 other bankers' banks in hopes of striking similar arrangements.
By working with clusters of banks, rather than individual institutions, GNA is able to deliver its services to community banks at lower cost. according to David M. Sanderford, GNA senior vice president in charge of bank programs.
"The worst thing you could do is be successful," at taking a scatter-shot approach to the small bank market, Mr. Sanderford said. "You would be spending too much money."
Indeed, marketing companies typically spend thousands, if not tens of thousands, of dollars on Presentations to bank executives and due diligence trips they take to the marketers' headquarters.
Outlays are greatly reduced by having the the bankers' bank oversee due diligence and then making referrals to members, Mr. Sanderford said.
The group approach doesn't just save GNA money - it also benefits smaller banks, according to Mr. Sanderford. GNA is able to provide services and payouts that are similar to those big banks receive, he maintained.
Share of Commissions
Banks receive a share of commissions on investment product sales. Those in the Bankers' bank programs offer GNA's own annuities and mutual funds, as well as the mutual funds of other companies.
Helge Christensen, president of the Bankers' bank of Wisconsin says the arrangement is indeed beneficial for his organization's members, whose average asset size is around $50 million.
"It provides a valuable service to customers and gives our banks a competitive edge," he said.
The Wisconsin group chose GNA in part because the company is "a manufacturer of product," Mr. Christensen said. "This cuts out the middleman, leaving fewer hands dipping in the income stream."
Competitive pressures are forcing marketing companies like GNA to look for new business from sources other than the large banks they have traditionally served. Most big banks already have sales programs, either in-house or with help from marketing companies.
"We will make a strong effort with community banks," Mr. Sanderford said. Indeed, GNA expects to add new banks to its programs in Florida, where 16 of the bankers' bank's 270 customers use GNA's services, and in Wisconsin, where 71 of the group's 271 customer banks are GNA clients.