Bank teller Destiny Hyler helps customer Jake Vail with his deposit at the Redwood Credit Union office on Fourth Street, in Santa Rosa on Thursday, March 27, 2014. (Christopher Chung/ The Press Democrat)

Sonoma County banks gaining more deposits

ROBERT DIGITALE
THE PRESS DEMOCRAT

First, the Big Banks got bigger, then Sonoma County residents and businesses started pouring money mainly into local and regional financial institutions.

In the past two years, two of the county's largest local lenders, Exchange Bank and Redwood Credit Union, each saw double-digit growth in deposits. The two belong to a small group of banks and credit unions that increased their share of the nearly $12 billion in deposits held in the local branches of the county's two dozen banks and credit unions.

Among lenders, Wells Fargo remains the bank with the most local deposits - nearly $2.6 billion in 15 county branches as of June 2013, according to records from the Federal Deposit Insurance Corp. But Wells Fargo's deposits declined 2 percent in Sonoma County between June 2011 and June 2013, the most recent data available.

Exchange Bank ranks second among lenders, with local deposits climbing 17percent in two years to nearly $1.5 billion. Redwood Credit Union ranks third, with its county deposits increasing 19 percent to almost $1.3 billion.

Bankers at local institutions insist that "go local" retailing efforts and the 2011 Bank Transfer Day struck a chord with consumers who want their money working in their own communities.

"We're seeing more new members and people moving away from the big banks," said Brett Martinez, Redwood's president and CEO. The nonprofit credit union's membership has grown 25 percent in the past three years to 232,000members.

In contrast to gains by Exchange Bank and Redwood, Bank of America fell two spots on the list, making it the fourth-largest bank in Sonoma County after its local deposits declined 19 percent during the past two years to nearly $1.1 billion.

Even so, Bank of America's deposits grew 9 percent in the county last year. A company spokeswoman said that deposits declined from 2010 to 2012 mainly due to the sale of the bank's First Republic branches and to the reclassification of certain business banking and wealth management balances that resulted in their movement to out-of-county offices.

Experts noted that the nation's top banks remain formidable competitors. For example, JPMorgan Chase experienced double-digit growth in deposits in Sonoma County in the past two years.

"Now the big guys are back on their feet," said Steve Reider, president of Bancography, a financial services consulting firm in Birmingham, Ala. In those places where the top banks are concentrating, he said, "they are absolutely gaining" in market share.

Rounding out the top 10 for county deposits are, in order: Luther Burbank Savings, JPMorgan Chase, Westamerica, Argent, Bank of the West and First Community. Of those six institutions, only Chase and Bank of the West saw significant growth in deposits over the last two years, with each increasing by 19 percent.

Overall, deposits in county branches grew 3 percent in two years to $11.9 billion.

The nation's "Big Four" banks - Wells Fargo, Bank of America, JPMorgan Chase and Citibank - saw their combined share of county deposits greatly increase through acquisitions during the financial crisis. Wells acquired Wachovia; Chase took over Washington Mutual; and Bank of America acquired Merrill Lynch. All the acquired institutions had local bank deposits.

By June 2011, the four banks together had captured nearly 42 percent of deposits in Sonoma County. Five years earlier, the four had less than a quarter of such deposits.

By June 2013, the Big Four's share had dropped slightly to just under 39 percent of all deposits.

Bankers with strong deposit growth gave credit to their staffs for building new business relationships with customers. But several also noted that the 2007-2008 financial crisis set in motion forces that help explain some of shifts in deposit trends.

With low interest rates and sluggish loan demand, there hasn't been a lot of competition for deposits in recent years. Banks typically have an abundance of available cash, while consumers and businesses can't find significant differences between the banks for interest rates on savings.

"When rates are low, money is lazy," said Joe Morford, analyst with RBC Capital Markets in San Francisco.

One result is that CDs, the timed certificates of deposits, have declined from about 40percent of all deposits in 2009 to less than 25 percent today, Reider said. Thus, the deposits by consumers and businesses today are more liquid and remain free to move to other banks when interest rates rise.

Another trend is that many individuals and companies are socking more money away today, local bankers said.

"If you go through something as painful as the Great Recession, you've got to learn something from it," Martinez said.

Bankers said many consumers appear to be trying to save more money for emergencies and future needs, as well as working harder to watch their spending.

At Exchange Bank, deposits have increased partly because many local companies are storing up money rather than investing it on capital projects or other efforts that could grow their businesses.

"It's a conservative approach that a lot of people are taking," said Gary Hartwick, the bank's new president and CEO. When the economy improves, he said, some of those companies may withdraw funds for new initiatives.

Among trends, local bankers said many consumers have switched their accounts to institutions that are based in the county. A milestone came in November 2011 with Bank Transfer Day, a grassroots frustration with big bank fees that grew into a nationwide movement.

While precise numbers don't exist, Martinez said he believes that Redwood was among the top five credit unions in the nation for the new accounts opened that day. And he and others maintained that the idea of banking locally still attracts many consumers.

"The whole movement has legs," said David Williams, vice president of corporate communications for Santa Rosa-based Community First Credit Union.

Community First increased its deposits in the county by 24percent to $127.6 million in the past two years.

Among the national banks, Chase has expanded the most in the North Bay since entering the market more than five years ago. At that time, it took over a number of Washington Mutual branches.

But the bank continues to expand, even as its county deposits last year rose to $743 million. Next month, Chase will open its 13th new branch in four years between Sausalito and Cloverdale, said Miki Saini, a senior vice president in charge of the region north of San Francisco.

"We're still building in California," Saini said. By listening to customers and providing good service, "we will continue to grow."

Among financial institutions, fifth-ranked Luther Burbank Savings continues to own the branch with the most deposits in the county. Its sole branch in downtown Santa Rosa holds nearly $1.1 billion.

In contrast, the county's 129for-profit bank branches have an average deposit total of $80.7 million.

Over the longer term, the FDIC data shows strong growth from two North Bay banks that rank in the top 15for deposits.

County deposits for Novato-based Bank of Marin have more than doubled since 2009, rising from $55.5 million to $119.7 million by 2013. Five years ago, the bank had three branches in Petaluma, but it since has added one each in Sonoma and Santa Rosa.

And Santa Rosa-based Summit Bank saw its deposits increase 33 percent over the past four years to $340.5 million.

Thomas Duryea, president and CEO, said part of that growth came by reaching out to local nonprofit groups. In the summer of 2009, Summit had $220,000 in deposits from eight nonprofits. By December 2013, that total had increased to $32 million from 130 groups.

San Francisco-based Bank of the West has seen its county deposits rise to $551 million. The bank is preparing for new lending opportunities this year, said Eileen Egan, a vice president and the North Bay area manager.

"The word that comes to my mind is real estate," Egan said. "We want to be there" for clients seeking to buy homes and other properties.

Six years after the financial crisis, bank interest rates still hover near historic lows. But experts see change on the horizon.

"We are optimistic that we will see loan demand pick up," said Morford, the RBC analyst.

Reider of Bancography agreed and said more lending eventually will lead to higher interest rates. That will please savers, but he cautioned "all of that is happening in very slow motion."

(You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com.)

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