While many banks are struggling to generate deposits, banks in the southeastern United States are have scored with aggressive campaigns to attract customers with higher rates.
Second quarter results show that several banks in the region managed to post double-digit deposit gains. And while those certainly came at a cost, the banks twinned their efforts with a sharper focus on deposit-account fees, so that the growth in fee income from such accounts often exceeded the growth in underlying deposits.
SouthTrust Corp. produced what may be the most dramatic example. In the second quarter, fees from deposits at the Birmingham, Ala., company surged 21% from the same period last year, though deposits rose only 13.8%.
Some of the fee increase can be attributed to more debit card processing, the company said. But SouthTrust also acknowledged it was becoming more of a stickler on deposit account fees, such as penalties for insufficient funds.
In the past, SouthTrust employees were allowed to be more lenient in waiving such fees, said Timothy Schools, executive vice president and head of investor relations.
Now SouthTrust, like many other banking companies, is putting a premium on service for customers who have multiple accounts - and is more willing to risk alienating customers who do not.
The company started using a new computer program nine months ago that evaluates more closely the customers who ask for fee waivers and the amount of business they do with the bank.
Customers with more than one account might stand a better chance of having a fee waived, Mr. Schools said.
Strong loan growth in the Southeast and rate hikes that have increased the cost of borrowing from the Federal Reserve have pushed the region's banks to seek alternative funding.
"There has been a renewed amount of emphasis on deposit generation," said David Stumpf, an analyst with A.G. Edwards & Sons in St. Louis. "Loan-deposit ratios are high, and wholesale funds got more expensive with the Fed increasing rates. I think it got a lot of banks more focused back on deposit gathering, with some success."
Wachovia Corp. and BB&T Corp. of Winston Salem, N.C, and Union Planters Corp. of Memphis also boosted deposit fees more than deposits in the second quarter. The figures were 14% versus 10.5% at Wachovia, 11.8% versus 11.1% at BB&T, and 5% versus 4% at Union Planters.
It was not immediately clear how much fee growth offset the higher rates, in absolute terms.
At the least, however, the companies have paid a price for those higher-rate accounts, Mr. Stunpf said.
"They have been able to grow deposits, but it certainly is not coming without some effect on the margin," he said.
Still, "there is no other choice," Mr. Stumpf said. "You have to reduce your dependency on wholesale borrowings. You have to have core deposits."