Confronted with fierce competition for deposits, several banking companies are assigning executives the specific task of bringing in more.
Leesport Financial Corp. in Wyomissing, Pa., Cascade Financial Corp. in Everett, Wash., and Cascade Bancorp in Bend, Ore., are among the companies that have created deposit-gathering positions in recent months. WSFS Financial Corp. in Wilmington, Del., is looking to hire two "deposit-specific" relationship managers.
Mark Fitzgibbon, the director of research at Sandler O'Neill & Partners LP in New York, said that with loan demand outstripping funding at many companies, he expects more to follow suit.
"The No. 1 challenge for the banking industry, in my opinion, is the ability to grow deposits," Mr. Fitzgibbon said. "So I think over the next few years you're going to see companies really increase their focus on deposit gathering and doing things like create a chief deposit officer, if you will."
Some in the industry worry that creating a separate position to focus on deposits might promote "silo" thinking, but Theo Moumtzidis, a managing vice president at First Manhattan Consulting Group in New York, defended the approach. He said more companies should designate someone to pursue the "big untapped opportunity" in commercial deposits.
"Traditionally, the commercial business is focused on loan generation," he said. "It's no accident that you often hear people who are commercial bankers actually call themselves commercial lenders. Deposits are an afterthought."
The deposit-gathering positions that are starting to pop up at regional and community banks will help them bring in business customers who might have been overlooked in the past - those with cash on hand and no need for a loan, Mr. Moumtzidis said.
That's just what WSFS has in mind. The yet-to-be-hired relationship managers will target escrow lawyers, real estate offices, and property managers, for example, said Marvin N. "Skip" Schoenhals, the chairman, president, and chief executive officer of the company and its $3 billion-asset Wilmington Savings Fund Society.
"While our traditional commercial relationship managers would never ignore that kind of relationship if it popped up in front of them, they are essentially trained to go out and look for loans. That's how they're oriented," Mr. Schoenhals said. "Rather than take their focus off of generating loans, what we want to do is have a couple of people who are focused on looking for those situations that don't generate loans, but generate deposits."
He said the deposit managers should have business development skills similar to the lenders, even though they will be going after different prospects.
Not every deposit opportunity is obvious, Mr. Schoenhals said. "You can have two home builders that are exactly the opposite - one a big borrower, one a big depositor. You have to go find those unique situations."
Andrew W. Stapp, an analyst at Cohen Bros. & Co. in Philadelphia, said he thinks creating the positions was a good idea for WSFS, because it has "extremely strong" annual loan growth of almost 25%.
"In the second quarter, loans increased 4.9% on a linked-quarter basis, while retail deposits grew 1.9%," Mr. Stapp said. "So they had to make up the difference with wholesale funding, which is pretty expensive."
That has been an issue for many banks lately. The percentage of U.S. banks that can finance at least two-thirds of their total assets with core deposits fell to 58.5% in the first quarter, from 70% at the end of 2002, and 90% at the end of 1995, according to the Office of the Comptroller of the Currency.
Steve Clark, the senior vice president who oversees cash management at WSFS, said the deposit managers will work in his area and will have no loan-gathering duties.
"One of our ideas is to create a partnership with nonprofits," similar to the affinity programs that credit card companies have, he said. "The premise is: We go to a nonprofit. We talk to them about getting their supporters bank with us. The result will be some sort of incentive payment to the nonprofit based on the balances their supporters maintain with our bank."
The $993 million-asset Leesport Bank, a subsidiary of Leesport Financial, plans to have six deposit positions, which it calls "business solutions officers."
Within the past six months it hired three bankers specifically to develop deposit relationships with municipalities, school districts, and commercial clients , said James E. Kirkpatrick, executive vice president and chief lending officer for the bank. He plans to add two more within the next year or so.
The bank created one such position five years ago with a different type of deposit approach in mind. The job started out as a support role to the commercial lenders, being "more reactive than proactive" with deposits, Mr. Kirkpatrick said. But the role evolved, as the loan portfolio and the need to generate deposits grew. In 1999 the bank had $70 million of commercial loans; today it has $525 million, he said.
Now its growing cadre of business solutions officers - who have both deposit and fee income goals - can call on prospects that would not necessarily have been a target for Leesport Bank's lenders in the past.
"It's not strictly cash management," Mr. Kirkpatrick said. "We're looking at merchant services and all those non-loan products that come from the bank side."
The bank also has 16 commercial loan officers, who have deposit goals and offer their customers a "deposit analysis," but Mr. Kirkpatrick said he believes the business solutions officers will bring in customers the bank might miss otherwise - ultimately giving it more deposits to finance loan growth.
"Deposit costs are still less than overnight borrowings as a whole," he said.
Margaret Kane, the president and chief executive officer of the Sacramento consulting firm Kane Bank Services, said many community banks have tried to get commercial loan officers to gather more deposits, without much success.
"So by default, what community banks are beginning to do is say, 'OK, we have to attack this from a different angle,' " Ms. Kane said.
A bank CEO recently told her he might create a deposit officer position because his loan officers are reluctant to discuss complicated cash management products.
"What happens is, you don't want to risk your credibility with the customer by talking about products you don't feel comfortable with," Ms. Kane said.
Still, she remains skeptical about the strategy of creating a position to focus on deposits. The upside is more dedicated expertise, but the downside is the risk of reinforcing a "silo" mentality.
Bankers should use training and incentive programs to make deposits more of a priority for loan officers, Ms. Kane said.
Some companies, such as the $14 billion-asset South Financial Group Inc., in Greenville, S.C., recently restructured bonus plans for relationship managers to give more weight to gathering deposits.
Mr. Moumtzidis said that even though the silo effect is a danger, he favors the "quick fix" of creating deposit positions. He also said that retraining loan officers is a challenge with its own drawbacks: The time it takes could result in missed opportunities, and the job of gathering deposits may not be a good fit for the loan officers.
"For commercial lenders, it's actually a big step for them to go out and gather deposits. It's a different sales process," he said. "People who are good at developing loan demand might not be good at developing deposit demand."
Analysts and consultants say competition is the driving factor behind the deposit crunch.
"The deposit competition in the market today is as intense as I've ever seen it," Mr. Fitzgibbon said. "The big banks are being extraordinarily aggressive in pricing deposits, and the smaller banks are really struggling to hold on to their deposit market share."
Mr. Moumtzidis said overall deposit growth is not slowing down. From 2000 to 2005 retail deposits at U.S. banks grew between 5% and 6% a year, according to First Manhattan's calculations.
"The reason why it's tougher to gather deposits is, in the same time period, many banks got religion about the importance of deposits," he said. "Now there are even banks out there trying to buy deposits, offering $100 in cash for someone to come and open an account."
