Capital Region banking leaders say deposits surging
Local growth in bank deposits shows more people are choosing to save their money during tough economic times, according to Capital Region bank executives.
The trend seems to benefit both large and small banks equally, but the smaller, locally based banks say they’ve benefited from citizens’ collective anger at larger institutions.
“It’s good to be a community bank right now in many ways, said Eileen Bagnoli, executive vice president and chief operating officer for Pioneer Bank.
Overall deposits for Pioneer were up $13 million in 2009 to $613 million by the end of December.
Of the $13 million, $6.15 million consisted of savings accounts, up 4 percent, Bagnoli said, showing people are saving instead of spending. The savings rate nationally has continued to increase during the recession and was at 3 percent of income at last check.
“When times are tough, people start getting scared and they think about saving for a rainy day,” Bagnoli said.
Those who had planned to retire couldn’t since investment portfolio values plummeted with the stock market. Even though portfolios have partially recovered, people are holding on to cash and transferring accounts to more stable investments as they are concerned with “maintaining what they have,” Bagnoli said.
For Adirondack Trust Company, 2009 marked the largest ever one-year growth in deposits, according to bank President Charles Wait.
Normally the bank sees deposit growth ranging from 4 percent to 6 percent. But last year, deposits increased by more than $86 million to $750 million, a nearly 13 percent jump.
To put the achievement in perspective, Wait said it took Adirondack Trust almost 70 years from its inception in 1901 to reach $100 million in deposits, “and we grew almost $100 million in just this year alone,” he said.
“Anytime you have decreased economic activity [nationally] you tend to have an increase in bank deposits. People are saving their money, they are not investing it. They are sitting on their money and waiting to see what’s happening.”
Wait said more people are returning to the notion of community banking.
“There is a movement to locally owned and independent institutions,” Wait said.
John Buhrmaster, president of 1st National Bank of Scotia, said he’s also seen an influx in customers who have moved deposits from larger financial institutions to community banks.
Last year, 1st National grew deposits by $35 million to $336 million by the end of 2009, a more than 10 percent increase.
“It accelerated last year and we see the trend continuing,” Buhrmaster said.
Part of the reason for the surge is a change in brand perception.
For generations, community banks were lumped with investment bankers. No longer, he said — consumers see a distinction between large financial firms and small banks.
“Now there’s a clear difference,” Buhrmaster said. “You don’t see $500 million bonuses coming from community banks. That’s for Wall Street.”
Buhrmaster said he’s happy to say 1st National has been marketing itself in the same way as when his great-grandfather founded the bank in 1923, as an alternative for the Glenville area as opposed to having to drive across the river to bank with larger financial institutions in Schenectady.
Buhrmaster said what’s also helping community banks is that people are realizing that they offer the same services as large banks, as strides in online banking, mobile banking and remote deposit close the gaps.
“Now the costs of these products have come down and the risk management is more efficient,” Buhrmaster said. “People are taking a hard look at who they trust with their money.”
For their part, major national banks with a local presence say they have not suffered any loss of deposits.
“We have not seen any noticeable account closures,” said T.J. Crawford, a Bank of America spokesman. “Solid deposit growth continues.”
Average retail deposits in the fourth quarter increased $89.9 billion or 15 percent for Bank of America.
KeyBank also saw year-over-year increases, according to spokeswoman Therese Myers.
“We are not seeing a decrease in deposits,” she said.
According to financial services firm KBW Inc., average deposits for 40 of the biggest banks in the country grew 8 percent in 2009 compared with a year earlier. Average loans fell 3 percent.
Charlotte-based Bank of America Corp. is the country’s largest bank by deposits. Besides KeyBank, other national banks with a Capital Region presence include JPMorgan and RBS Citizens National.