Heritage Clubs International - May 2009 Newsletter

WILL A BANK CLUB WORK IN THIS DAY AND AGE?

Written by: George Aker, HCI President

Many bankers are questioning the basic tenets of banking in a time of wide dislocations in common instruments. Who thought we would ever feel “sub-prime mortgage loans” would achieve elevated status. (And did any community bank ever make one?). Why are big write-offs in vogue, even from preferred stock in quasi-governmental agencies like Freddie Mac and Fannie Mae?

We visited with O. J. Tomson, founder of the first Heritage Club in Charles City, IA back in 1980. In the 80s he saw valued Ag customers moving to town and looking for special relationship with their old friend, the banker. He had many customers who had never left the county, but had grown to be sizable borrowers and depositors. O. J. felt that he should show them appreciation, so he arranged for the local movie theater to open up for a morning performance; they enjoyed a cup of coffee and a cookie, listened to the banker for 20 minutes and then enjoyed a free movie.

As O. J. now describes it, many of those same retired customers have now traveled to six continents and visited the world. Still relatively few have made it to Antarctica, and they had better go soon with the rate of global warming. These same customers have continued to trust their deposits to O. J.’s bank, up to the $100,000 FDIC limit, now raised to $250,000, or to any limit with the wonderful new CDARs program of Eugene Ludwig, former Controller of the Currency. By meeting the special needs and interests of good customers, the bank has been rewarded with very loyal customers who have entrusted their core deposits for a lifetime. These days, the customers may be satisfied with shorter trips to quality attractions in our range of home states (and our states all have dozens of great destinations worthy of attendance).

All of our community banks compete with the “too big to fail 19 banks with TARP funds” many of whom are represented in our markets. In one midwestern state, many of the very large banks have gone to “market presidents” who may not be known to long time customers. A call to the local trust department may be answered in Texas or California, with perfectly good answers available for the questions, but our customers want to know whom they are talking to with their most important questions. A bank club builds loyalty and trust with the most important retail depositors of our bank. It provides seminar opportunities to show customers all of the strides in bank services that meet their needs, and generate fee income for our banks. The club itself allows the opportunity to make a profit on travel, which is one of the most attractive activities for our successful retired depositors. Many of our banks are generating 20 to 40 % of total core deposits from their bank club customers, which stick with us through thick and thin. Club members are also an ideal cross selling market for trust, investments, and bank services, as well as a source of capital to support growth. We are fortunate to enjoy the acceptance of these great friends. In customer service, the bank club directors provide a “fail safe” opportunity to know of any times when we may have failed to provide for the customers need, so that we can make amends before the customer silently slips away to the competition. Bank clubs provide excellent communications for all parts of our bank, and create a corps of informed proponents for our bank in the local market. Make the best use of your bank club to provide profitable services to a loyal and appreciative audience.

So, in answer to the question if a bank club will work in this day in age; YES! In fact, it is evident that a successful club can be critical to the overall success of your bank. Now more than ever, your club can and will make the difference. We encourage you to share this with your management as you review the status of your own club.

George Aker

President, Heritage Clubs International, LLC
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As a valuable reference for new and veteran club directors alike, here is a link to the Heritage Clubs Membership Guide. You may wish to share this with your management as a reminder of all the valuable benefits of your Heritage Clubs membership.

Reminder that HCI 'Banking News' is another great resource for your bank club. We have links to all recent NorthWestern Financial Review weekly e-updates.

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