Supermarket shoppers tempt bank First National ready to open branches in 3 Frederick County grocery stores


A dozen eggs, a pint of milk, a box of cereal and a six-month CD.

The grocery list of the future has arrived, courtesy of First National Bank of Maryland. Come November, the bank will be the first in the state to operate full-service branches inside supermarkets -- three Weis Supermarkets in Frederick County, to be exact.

Except for Glen Burnie's Leedmark -- a European-style hypermart that sells groceries among everything else -- Maryland shoppers looking for some dough to take home with their bread have had to make two trips.

Despite some early setbacks, the trend of in-store bank branches has been accelerating around the country. Some bankers and industry consultants are pessimistic, however. They note that some prominent banks and thrifts have tried the concept, only to find the costs of running essentially a check-cashing outlet drowned whatever market share gains they made.

But First National, a subsidiary of Baltimore's First Maryland Bancorp (itself owned by Allied Irish Banks of Ireland), is betting the convenience of one-stop grocery shopping and banking will generate enough volume to outweigh the costs.

The branches will offer all the services and products of a traditional branch, including several tellers, an officer to conduct more private transactions, such as loan applications, an automated teller machine and safe deposit boxes. The locations will be open from 10 a.m. to 7 p.m. weekdays and until 4 p.m. Saturdays.

And, perhaps most out of character for a commercial bank, there will be weekly specials and employees roaming the aisles, actively trying to draw in customers.

"We'll be promoting our products alongside the apples in the produce section," said Joan Gillespie, senior vice president and director of retail marketing.

Innovative marketing will be a must in order for the concept to succeed, said Phillip White, associate professor of marketing at the University of Colorado at Boulder. A supermarket "has 15,000 products, every one of which is more colorful than what a bank has to offer," he said.

First National said its target market will be consumers 25 to 50 years old; business accounts need not apply. "It's the generation that really has no time," Ms. Gillespie said.

Maryland is by no means on the cutting edge of the in-store banking trend, according to the Food Marketing Institute in Washington. While the number of supermarket bank branches nationwide remained below 200 for most of the 1970s, in the mid-1980s the phenomenon began to skyrocket. There were more than 1,100 bank branches in supermarkets last September, according to the institute, which estimated that this year the total would reach 1,500.

National Bank of Commerce in Memphis, Tenn., is one of the leaders of in-store branching; it's made even more money serving as consultant to other banks looking into the idea. In fact, the company is working with First National on its effort, helping develop the floor plans and product ideas.

First National officials point to several advantages to locating a branch inside a supermarket, including the low cost of leasing space from the grocer compared with building or buying a freestanding branch. Plus, people tend to visit grocery stores about 2.3 times a week, almost twice as often as they go to a bank branch.

The bank chose Frederick as the pilot of what may become a statewide program because First National has five locations in the rapidly growing consumer banking market and wanted to "build density in the market," Ms. Gillespie explained. Weis, a five-state chain with 127 locations, is the dominant grocer in Frederick.

The Baltimore-based company is still negotiating a five-year lease with Weis for the three 400- to 500-square-foot locations. Unlike some failed in-store bank deals, the rent will not vary with the level of sales at the bank, according to Ms. Gillespie, an arrangement that encourages bank employees to shunt off large accounts to a different branch. The two companies are still discussing whether the ban on commercial accounts also will apply to the Weis stores themselves.

That's a crucial point, according to banking consultants, because it could mean the difference between transaction costs that are reasonable or crushing. If supermarkets, which have high money-handling costs, can merely dump all their cash and checks on the employees of the in-store bank branch, they can transfer the expense, noted Michael Moebs, chairman of a Lake Bluff, Ill., economic research firm.

What's more, supermarket customers are more likely to use the bank branch for high-cost check-cashing than for the more profitable bank products, such as auto or home equity loans, Mr. Moebs added. And if the bank doesn't raise its fees for supermarket service -- as First National said it won't -- "they'll lose their shirts," he said.

That problem may be mitigated a bit at Weis. The company is one of few that allows customers to pay for their groceries with a credit card or bank ATM card. That, in turn, could reduce the pressure on First National to supply cash for every customer in the store.

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