2nd-chance accounts get attention from banks

Central National Bank, a Junction City-based bank with branches in Wichita and Newton, is garnering some national attention with its second-chance checking program.

The bank, which has $800 million in assets, was the subject of an ABA Banking Journal article published last week on the program that the bank says has netted it hundreds of new checking account customers a year for the past three years.

" (That) represents the pool of people we were turning away in the past," said Sara Girard, Central National's senior vice president of marketing.

Girard said a few years ago the bank, in analyzing its data, learned that it was turning away about 18 percent of its prospective checking customers based on their past history of charged-off checking accounts.

"When we started digging into the numbers we saw quite a few that were potential customers," she said.

And in the bank's drive to increase its account base, it created its second-chance program. It also worked with a bank vendor, Stratis Technologies in Louisville, Ky., to develop a system that would closely monitor the second-chance accounts. The accounts are more restrictive than traditional checking accounts and customers are charged a $9.99 monthly fee to have them.

Girard said the attrition rate on the accounts is 37 percent. But the bank has more than 1,100 active second-chance checking accounts and 250 accounts that started as second-chance have successfully converted to a traditional checking account.

Wichita-based Southwest National Bank also launched its own second-chance checking account program three years ago.

Southwest CEO Trish Minard said offering the accounts is "a lot of work" in terms of monitoring and maintaining them at the $357 million-asset bank.

But "we have a lot of accounts that were opened in 2007 and are still open," she said. "Some people really value second-chance and some people don't."

She said the average balance of a second-chance account at Southwest is $600.

Minard said that in looking at the program and her expectations for it, "I'm surprised that there aren't more, because of the economy.

"But... we have not aggressively marketed this program. It's just another tool for our customer service reps to give people an opportunity to rejoin banking."

While the Federal Deposit Insurance Corp. doesn't track the number of banks offering second-chance checking accounts or the number of customers enrolled in them, officials say it is a big, untapped market.

FDIC spokesman David Barr said that based on his regulatory agency's 2009 survey of unbanked and under-banked households in the country, about half of households not using a bank at one point had a bank deposit account.

"That equates to about 4.5 million families," Barr said. "This is the potential size of the market for banks to reach out to."