Indiana Bank Attracts Fund Business Without Siphoning Off Deposits

Executives at one small Indiana bank seem to have found the secret of doing a brisk business in investments without having to cannibalize their deposits.

Lafayette Bank and Trust, a $350 million-asset bank in Lafayette, Ind., has been drawing customers away from its big bank competitors for seven years with a mixture of hand-holding and an aggressive campaign to bring in new money.

The bank has managed to draw only 20% of new sales from internal deposits, while the average for a bank its size is 48%, according to American Brokerage Consultants, St. Petersburg, Fla.

The majority of Lafayette Bank's investment sales have come from savings accounts held in other banks and maturing certificates of deposit.

"In this town it is not usual for people to have CDs in at least two or three banks around town, and that's a lot of the money we go after," said Art Grisez, a broker with Robert Thomas Securities in St. Petersburg, who heads the bank's sales program.

New sales also come from individuals looking to roll their retirement plan money into investment accounts.

Lafayette is one of the fastest-growing communities in the country, drawing in more new residents every year. Situated halfway between Indianapolis and Chicago, the city is home to some of the country's largest corporations as well as Purdue University.

To tap into the community, the bank advertises its investment services in local newspapers and runs a 30-second television spot daily. Although the ad mentions the investment center only for a few seconds, Mr. Grisez said, "we've gotten more inquiries from that five seconds than from all our print ads put together."

Mr. Grisez and the bank's two full-time investment representatives also hold investment seminars at community centers or the bank's branches every month. The topics of the seminars range from retirement planning to how to save for a college education.

But he credits employee referrals as the single biggest source of new investment sales.

"If the branch managers hadn't been behind us, we would have had a tough time getting off the ground," he said. "I think most of our sales, in the beginning especially, came from word of mouth from the managers."

The effort has paid off, Mr. Grisez said, though he would not disclose the program's profitability. More than 700 bank customers use the investment services now, and the program has more than $50 million of assets under management.

Lafayette Bank has faced some tough competition from its cross-town rivals, however. Banc One Corp., NBD Bancorp, and Huntington Bancshares all offer investment services in the Lafayette area.

But Mr. Grisez said at least one competitor, Banc One, has pulled back on its effort to compete in the area and moved its only investment rep in the city 50 miles down Interstate 65 to Indianapolis.

Lafayette Bank's name recognition hasn't hurt either, according to its president, Joseph A. Bonner.

The bank has been around since 1889 and is a fixture in the community, along with Mr. Bonner himself. Born in Lafayette 63 years ago, he has been dispensing advice along with deposit slips for 26 years.

"I know tons of people in this town, and I also know what they need in the way of financial help," Mr. Bonner said.

Mr. Bonner spearheaded the bank's move into the investment product sales in 1988 when most community banks thought of the business as competition for traditional bank products and services.

"I got tired of seeing business go out the door and down the street to the local brokerage," he said. "What people needed was someone to help them buy investments for their personal portfolios and help them plan for their future needs."

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