Lessons from One Bank with CU-Like Satisfaction, Growth

It's become part of the accepted wisdom of 2010: customers just hate their banks.

Then why do 40% of the customers who have their mortgages at BancorpSouth stop into a branch every month to make their payment? It's not that the bank doesn't have an online payment option. Or that every one of those people is making the payment on its due date. Or that it doesn't accept checks or have a mailing address the Post Office can't find.

It's just that the customers love their bank, according to its chairman, Aubrey Patterson. "Those payments are made throughout the grace period," Patterson said. "It's more a matter of the actual consumer identification. It stems from the relationships we have."

Mortgage officers are in every branch.

Patterson heads up the eight-state, $13-billion bank that is based in Tupelo, Miss., and many of the bank's strategies will strike a chord with credit unions. Patterson, speaking at SourceMedia's Best Practices in Retail Financial Services Conference, said BancorpSouth's business model is based on the following: innovation, personalized service, decentralized delivery, growth at a measured pace, and a value proposition in a relationship context.

Spread across eight southeastern states, Bancorp South has regional and community presidents in place, and Patterson said it grants great autonomy at the local level.

On the deposit side, the bank has been emphasizing growth in demand-deposit accounts, due to lower cost. "From a profitability standpoint, we have prudently used alternative funding sources to fund our loan growth," he said. "We have been much more conservative in our approach to CD pricing."

To take advantage of the lower rate environment, Bancorp South has succeeded in stretching average certificate terms to 14 months from 10.5. "As a result we've been able to lower our short-term borrowings by $1.2 billion."

Patterson said the bank is "committed" to relationship pricing and a community banking model. "Our relationship managers can and do move independently to retain business," he explained. "We will fight hard to keep retail and business deposits, even though in the short term it might negatively affect our spread."

To that end the bank provides every lender and CSR with data showing the marginal revenue and marginal cost curve on both sides of the balance sheet to let them know the immediate impact of their decisions.

While credit unions may claim to provide the best service, it hasn't stopped others from also making the claim. In the case of Bancorp South, it uses the slogan "Our Service Sets Us Apart," and was recognized in 2008 by JD Power for its high customer satisfaction level.

With the July 1 CARD Act compliance deadline approaching, he said the bank has "thoroughly" examined its deposit strategies and pricing. "And it seems to me there are certainly opportunities in this, as well. We are preparing for all the logistics," said Patterson.

Michael Lindsey, SVP/manager-retail banking with BancorpSouth, noted he is acutely aware of funding needs. "If we are out gathering deposits that aren't priced correctly, then we are not doing our job for the bank," he said.

Like Patterson, Lindsey stressed BancorpSouth's emphasis on "building relationships. We are not out there looking for hot money or single-service households. If we open a CD relationship, our team is in touch to deepen that relationship."

Similarly, he said the bank does "not try to cast wide nets to catch new customers. We try to make very specific offers with things that are relevant to them. We try to offer bundles of services that are appropriate." Like other institutions, it has targeted younger consumers as prospective members. It has emphasized the availability of FinanceWorks from Intuit.

Lindsey said Bancorp South has been aggressive in onboarding. One day after becoming a customer, it sends an automated letter. A week later, there is a follow-up call from the officer who opened the account. At 45 days the bank is in touch again to inform customers of the convenience products it offers, and between 60-90 days it goes into a full cross-sales program.

"Cross sales are where we have most opportunity to expand," said Lindsey. "We do scoring to determine the propensity to buy. We also determine product most likely to buy next. In 2009, did very, very targeted direct mail. It's important in order to distribute customer call sheets to branches. We put pop-ups in the teller system related to direct mail. Also, when the customer signs on to Internet banking they are presented with the same product received via direct mail."

The result of those efforts, said Lindsey, has been a 3% to 4% response to cross-sales efforts. Not to mention all those customers who want to stop into the bank.

Frank J. Diekmann is publisher of Credit Union Journal and can be reached at fdiekmann@cujournal.com.