Magazine article American Banker

The Small Bank's Edge in Municipal Deposit Chase

Magazine article American Banker

The Small Bank's Edge in Municipal Deposit Chase

Article excerpt

Can community banks win back the municipal deposits they have lost through the years?

To Peter J. Sposito, the president and chief executive officer of Bankers' Bank Northeast, the answer is a resounding "yes." All the banks have to do is let municipal officials know about the new services they can offer because of modern technology and then, most importantly, ask for the business.

In the fall issue of The Respondent, the official publication of Bankers' Bank Northeast, Mr. Sposito reminds us what the bank-municipality relationship used to be.

"Years ago the community bank was the logical place for the local cities and towns to place their deposits," he wrote. "It was convenient, as the bank was nearby. It was simple. The local treasurer knew the bank president, the local directors, and most of the bank staff, and he trusted them. Most importantly, it made economic sense." The deposits helped the bank "increase its loans for homes, new businesses, expanded businesses, or other economic development activities."

But as some banks merged and became giants, their municipal departments became one-stop shops for local governments, and the local bank could not compete, according to Mr. Sposito.

Today, however, the community bank can provide the same services as larger banks, so the community bank's traditional advantages are being recognized again. Technology has become the leveler in banking, Mr. Sposito tells us. When that occurs, "convenience, simplicity, and trust are values that will always win."

When I called him at his bank's Glastonbury, Conn., headquarters for further elaboration, he stressed that an efficient lockbox operation is the key to a successful municipal deposit business.

When someone asks a municipal officer whether a tax bill has been paid, the officer has to be able to find out immediately. …

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