On some days, customers can use certain branches of Richfield Bank and Trust in Minnesota to make a deposit or cash a check, and on others they can get physical therapy, nutrition counseling, and nursing care in the same spot.

Richfield is sharing office space in retirement facilities throughout the Twin Cities in hopes of reaching more senior citizens — always a dependable source of deposits. It opened 25 branches in independent and assisted-living communities in November and hopes to open 35 more by April.

Like most of its peers, Richfield is struggling to attract funds to meet loan demand.

“Funding today is one of the biggest challenges community banks have — how to maintain a growing pool of deposits,” said Lynn R. Evans, president and chief operating officer of the $662 million-asset company.

Most of Richfield’s retirement community branches are open for two and a half hours two or three days a week. One banker travels among three facilities, setting up shop in a small office that typically contains a safe, desk, computer/printer, and two chairs. Each makeshift branch costs roughly $33,000 a year to maintain and offers everything a traditional branch does, except safety deposit boxes.

“We open accounts, balance checkbooks, do trust planning — anything a client needs from a financial standpoint,” said David Stavenger, senior vice president of retail banking at Richfield.

Individually, the branches are not big money-makers. For example, Richfield’s pilot branch in a retirement community in Burnsville has brought in only $1 million of deposits since it opened in February.

“But,” said Mr. Stavenger, “if you take that concept and multiply it by 50 or 60 locations, all of a sudden it’s a pretty big number. Sixty locations times a million, we’re talking $60 million. That’s a good-size branch for Minnesota.”

Retirement community branching is becoming more popular — especially in areas with high concentrations of the elderly such as Florida and Arizona — but is hardly a new concept.

Columbia Bancorp in Maryland has had branches in retirement communities for 10 years. John Bond Jr., president and chief executive officer of $737 million-asset Columbia, said the niche tends to be overlooked by larger banks.

“Big banks shy away because they can’t expect more than $10 or $12 million in deposits in the size communities we’re talking about,” he said. “For them, it’s pocket change; for us, it’s meaningful.”

Columbia operates five branches in senior communities with an average of about 250 residential units. They are open five days a week and keep longer hours than Richfield’s.

“We would not do it part-time,” said Del Karfonica, a senior vice president at Columbia “It’s too much of an interruption for a customer base. They would have to work around the bank’s schedule.”

Each of Columbia’s retirement community branches has generated $5 million to $10 million of deposits, substantially more than the $3 million it takes for them to break even. The company strives for a penetration rate of 80% in the communities, and the strong deposits offset the branches’ low loan production.

“It’s fairly remarkable what you can generate in banking business,” Mr. Bond said. “Within our market we are interested in doing as many as we can,” he said, referring to branch openings.

But these branches have a key flaw, said Ken Thomas, a consultant with K.H. Thomas Associates in Miami.

Retirement communities may be rich in core deposits, but seniors generally live off the income from their certificates of deposit. Hence they tend to shop around for higher rates and withdraw when rates go down to put their money into better-yielding investments, Mr. Thomas said.

“It’s like a faucet,” he said. “Raise rates, money comes in. Lower them, money goes out.”


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