Tulsa Area Banks Offer Depositors ‘Comfort’ with CDARS

A program designed to give depositors access to FDIC insurance on accounts exceeding the normal limits for coverage has found higher favor among Tulsa area banks than the national average.
At least 20, or nearly 30 percent, of the 67 banks with branches in the Tulsa Metropolitan Statistical Area, participate in CDARS – the Certificate of Deposit Account Registry Service.
In Oklahoma, 65 of the 269 banks, about 24 percent, participate, said Phil Battey, vice president of public relations for Promontory Interfinancial Network LLC, the Arlington, Va., company, which runs the deposit-placement service.
Nationally, more than 1,400, or 17 percent of banks, participate, with an average of a bank a day joining the network, Battey said. CDARS raised its deposit ceiling to $30 million from $20 million in September.
Ordinarily, savers’ deposits are covered by the Federal Deposit Insurance Corp. for as much as $100,000 per depositor, per institution.
Promontory breaks up large deposits into pieces of less than $100,000 and spreads the pieces among the banks in its network. To the customer, the deposit looks like one CD, with one interest rate, one bank statement and one 1099 tax form.
Banks pay a fee to participate in the network and a transaction fee for each deposit placed through CDARS. There are no additional charges to consumers.
Pawnee-based Security Bank, which has a Tulsa branch at 10727 E. 51st St., was the first Tulsa County bank to join the CDARS network, signing up in May 2003.
Diana Lowe, Security vice president of investment, said the CDARS program has been very helpful to their small business clients.
“What our bank does is cater mostly to the small business community,” she said. “Clients are very limited under FDIC insurance when it comes to a small business, because they can only have $100,000 in their bank.”
She said the bank also had a number of individual customers who could take advantage of the CDARS program.
“A lot of our customers had more money than a $100,000 that they wanted to keep here at the bank,” she said. “This was an easy way for them to be able to deal with me with all of their banking needs but yet I could have them fully covered under FDIC.”
Security Bank, which was the 14th largest Tulsa area bank with deposits of $262.7 million as of June 30, 2006, has $184 million in CD deposits with about $3 million in the CDARS plan, Lowe said.
Tulsa-based F&M Bank and Trust Co., the largest area bank to participate in the program, joined CDARS in May 2004 to provide customers an improved “comfort level” as well as to increase deposits, said Rhonda Bailey, senior vice president.
F&M, which has nine branches in the Tulsa area and two in Dallas, was the third largest metro bank with $1.03 billion in deposits in the market area as of June 30, 2006.
Although she could not provide a dollar figure for participation in the program, she said the bank has gained clients and increased customers’ deposits in the bank.
“We have had a lot of success with it,” she said.
“It has probably let some of our larger customers retain deposits instead of moving them to multiple locations” to stay within the $100,000 insurance limit, she said.
“We recognized that there were people running all over town making deposits. We thought this would be a solution for some of that and it would help us to keep those deposits,” she said. “We may have been their primary bank, but they were using somebody else just to keep insured. People like to deal with their banker, and (under the CDARS program) they only have to deal with one person instead of running all over.”
Tulsa National Bank, 7120 S. Lewis Ave., also saw an opportunity to increase its customers comfort level and to attract an additional deposit base when it joined CDARS two and a half years ago, said Dawne Stafford, executive vice president and chief operating officer.
“We were running into customers who, either on their own or on the advice of an accountant, felt more comfortable placing their money in several different banks in order to always obtain FDIC insurance coverage,” she said. “So when this product was presented to us we knew that we had customers where we knew we could get a larger share of their pocket or their wallet, if we could help them gain some security.”
The target audience for loans for Tulsa National, which ranked 21st in the area with $138.6 million in deposits as of June 30, 2006, “is definitely the medium-sized business customer and professionals, but out deposit customers are often CD customers – customers who put their investable funds in the bank.”
“But we also thought from the very beginning that this would be a way to attract more customers,” and often larger customers like institutions, she said.
Stafford said, “If customers have a large enough deposit like $500,000 or more, then they are going to have a lot more negotiation power when it comes to rates and terms, but if they have to go to five different banks around town and shop it, in order to maintain security, then they have lost that rate negotiation power.”
“So we really tried to make this product availability known to that market customer, and that has been an expansion of our deposit base,” she said.
Tulsa National has about $22 million in deposits in the CDARS program with “probably an increase of about $12 million that are completely new depositors with this bank,” Stafford said. ?



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