Many banks have sought to attract customers by opening branches in department stores and supermarkets, but one Kentucky banking company is putting a new spin on that old model by building a store in its branch.
The $223 million-asset Citizens Commerce Bancshares in Versailles plans to break ground next week on a branch that will include a BP gas station and convenience store.
Though some banks sell retail items - such as coffee mugs and T-shirts - in their branches, the Citizens one would be the first with a full-fledged in-bank store. Citizens had to go through some regulatory hoops (the OCC said no before the Fed said yes), but if it catches on, the company will consider building similar ones in the future, its president and chief executive said.
Current customers obviously would be welcomed at the branch, but president and CEO John E. Soper 3rd said the chief aim is attracting new ones.
The branch will be built in Frankfort, about 12 miles from Citizens' primary market, and Mr. Soper said he believes his company can make a name for itself there faster by pairing its branch with a retail outlet that is bound to bring in steady traffic.
Among the perks it is offering customers: a nickel-per-gallon discount on gas purchased at the station with their Citizens Commerce National Bank debit card.
"Statistics show you that consumers have multiple credit cards in their pocket and one debit card," Mr. Soper said. "We want to be that debit card."
Mixing banking and retailing is hardly a new concept. In-store branches have been around for decades, and in recent years banks have been adding retail-type features to their branches in hopes of bringing in more foot traffic. PlainsCapital Bank of Lubbock, for example, recently opened a branch near Texas Tech University that shares space with a Starbucks coffee shop.
But Granville Gates, a consultant specializing in in-store branches, said Citizens' branch would be "pretty darn unique."
Mr. Gates, a vice president at NCBS, a division of SunTrust Banks Inc., said that he helped Charter One Bank build branches that share space with Starbucks, and he created in-store branches for other banks that include drive-up lanes, but he has never heard of a branch being built from the ground up to include a store.
Getting regulatory approval for the project, though, was not easy. Citizens initially applied at the bank level for permission to build the branch, but its primary regulator, the Office of the Comptroller of the Currency, rejected the plan.
Citizens eventually received approval at the holding company level from the Federal Reserve Board, which approved it on the condition that the bank occupy more than 50% of the space. Essentially, both the bank and the convenience store will lease the space from a separate Citizens subsidiary.
Neither the Fed nor the OCC would discuss Citizens' applications. According to the Code of Federal Regulations, the OCC lets a national bank build and lease municipal buildings and "invest in real estate that is necessary for the transaction of its business," but there is no provision for a bank to own a building that it leases to a private business.
However, the Bank Holding Company Act lets a holding company hold or operate "property used wholly or substantially by a subsidiary in its operations or for its future use."
The lot is two and half acres, so it can be configured to handle the traffic of both a bank and a gas station. The site is slated to have 12 gas pumps, a separate entrance for each business, and a joint entrance. The 8,000-square-foot building will include drive-through lanes.
Mr. Soper said the idea of adding a convenience store to the branch did not come up until after Citizens had bought the land. BP PLC, it turned out, had purchased an adjacent lot and planned to build a gas station and store there, and Citizens approached the retailer about buying the lot and combining the two businesses, he sad.
It helped that three of the bank company's directors are in the convenience store business, and they helped with many of the details, including drafting lease agreements that worked for all parties, he said.
"If I didn't have the expertise on my board, this would be a daunting venture," Mr. Soper said.
