Lockport Savings Bank in Lockport, N.Y., spurred by the success of its first supermarket branch, is opening a second one.

Lockport, a $900 million-asset mutual, opened its first one in May, in the Tops International Super Center, Niagara Falls.

The branch has already picked up about $8 million of deposits and reached 88% of the 12-month goal for consumer lending.

It has also taken 19 mortgage applications, for $1.12 million of pending loans.

"Lockport's performance is outstanding," said John W. Garnett, executive vice president of International Banking Technologies, Atlanta, an in-store bank marketing firm that advised Lockport.

Keys to Success

The thrift has followed the keys to success that IBT advocates, Mr. Garnett said: having a service-oriented staff; staffing with plenty of employees, so you have people free to work the aisles; and using the branch as a marketing platform.

As IBT suggested, IBT is monitoring the time employees spend marketing the bank's services and products to the shoppers in store aisles.

Although there are very few supermarket branches in northern New York State, more and more banks around the country are venturing into nonbank environments.

In the first six months of 1993, 200 bank branches have opened in U.S. supermarkets and in retail stores with grocery departments. IBT reports that as of June 30 there were, 1,749 instore branches nationwide, 28% more than a year earlier.

"You've got major large banks that have adopted in-store banking as a strategy, while community banks use it very effectively to compete with the big banks," Mr. Garnett said.

Smaller banks have embraced the idea mainly because of the economics involved.

"We have our 10th facility at half the price of a brick-and-mortar branch," said William E. Swan, president and CEO of Lockport. "It allows us to compete because we don't have a lot of branches built."

The new branch will operate for 62 hours a week.

Mr. Swan says Lockport's main competitor throughout its service area is the superregional giant Keycorp, which has $14.5 billion in assets. Keycorp has 352 branches in New York State, but only one of those in the Buffalo area is in-store branch.

"When you're our size and you don't have many resources, it's a much bigger deal to open your ninth and 10th branch at a reasonable cost than it is for Keycorp opening its 99th or its 100th," said said Diana L. Healy, a Lockport vice president.

Commercial banks have entered the supermarket arena fairly recently, said to Mr. Garnett. In the 1970s some banks set up facilities in supermarkets and other stores, but they operated mainly as check-cashing facilities. Most of those facilities are gone today.

The '80s brought S&Ls into supermarkets, where they generated deposits mostly through rate incentives and premium rates on CDs.

Toward the end of the decade, however, commercial banks that snapped up the troubled thrifts eventually took over the in-store branches as well.

Thus, the Lockport bank is one of those banks that belong to what Mr. Garnett calls the third generation of supermarket branching.

During the Oct. 8 opening of the Amherst branch and all through the long weekend, Lockport fielded two employees to invite shoppers to come to the bank. Their efforts were rewarded with $164,000 in new deposits, two applications for consumer loans, and two appointments for refinancing.

Mr. Swan stressed, however, that his highly liquid bank is hoping to develop more loans rather than generate deposits from the in-store branches, each of which serves a market area of about 30,000 people.

They expect the new branch to outperform the one Niagara Falls because the new one is farther from the Canadian border.

"With the Amherst branch, there is no Canadian traffic, so we have more loan prospects," Mr. Swan said.

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