Sunday, November 01, 2009
Shifting deposits
Community banks in the Roanoke and New River valleys are gaining ground.
The latest from The Ticker blog
Community banks are gaining on big, national banks in Southwest Virginia, according to data released recently by the federal government.
HomeTown Bank and Valley Bank in Roanoke are still in the single digits in terms of market share. However, there is evidence they attracted more than their share of deposits during the financial crisis of 2008 and 2009.
Same for National Bank of Blacksburg, which saw its double-digit market share grow by a hair.
Meanwhile, the domain of several large banks is declining slightly in Southwest Virginia.
Bank of America and BB&T, in particular, aren't quite as dominant as before, according to a snapshot of deposits from June 30 released by the Federal Deposit Insurance Corp.
The market share report, released in mid-October, is one possible indicator of which financial-services brands people trust most in this time of financial disarray. It outlines the universe of banks in the region and how much money people have parked in each of them. Each bank's market share is its share of total deposits in its market.
Bank deposits grew by 12 percent in the Roanoke metropolitan market and 7 percent in the New River Valley metropolitan market. But some banks collected a disproportionately large chunk of the new money, improving their market share.
All bank accounts are FDIC insured up to $250,000, which means bank deposits that size or smaller are considered safe whether in a small bank or a large one, a new bank or an old one.
In spite of this guarantee, consumers showed clear preferences for some of roughly 20 banking brands in the area.
George Morgan, a professor in the finance department at Virginia Tech, offered a possible explanation. He said consumers better understand the riskiness of putting money in a bank because of the many bank failures they witnessed during the tumult of 2008 and 2009.
He said with large banks facing most of the trouble, consumers gravitated toward small banks, known as community banks,
"They're not in the news. They're not failing, at least around here," Morgan said. "That's a good thing. People are more willing to put their deposits there."
Some people have ended up at dominant banks that effectively chose them.
Time and again, mergers and acquisitions have bundled previously small or regional banks into big, national brands with thousands of branches.
Case in point: Wachovia Bank.
Wachovia is the most popular bank in the Roanoke Valley, according to FDIC deposit tallies. Wachovia has been the dominant bank in the valley since it purchased First Union, the former market leader, in 2001, and plastered its name on the tallest building in Roanoke. The sign is going to change next year or in early 2011 to Wells Fargo, which bought Wachovia at the end of 2008.
Similarly, FDIC figures say StellarOne Bank is the most popular bank in the New River Valley, based on deposits. StellarOne consists of two banks merged into one. One component is the former Christiansburg-based FNB Corp., which had been the most popular bank in the New River Valley.
FNB and the former Virginia Financial Group of Culpeper merged last year, at which point signage for StellarOne appeared in Christiansburg.
But in this case, not every FNB customer stuck around.
A group loyal to FNB but who opposed the merger made up their mind to start a new bank.
That sentiment gave rise to a decision by HomeTown Bank to place a branch in Christiansburg named NewRiver Bank in 2008.
Many people left FNB and "moved their accounts to us," said Tommy Loflin, market president.
Loflin saw more movement of funds when the crisis hit in the fall of 2008. People with more than $100,000 in a single account moved money to a new account or a new bank.
Why? At the time, the FDIC insured accounts only up to $100,000.
Many banks both lost and received deposits during that time, he said. The overall market-share effect of the crisis was clear to Loflin.
"Community banks came out ahead, as a rule," he said.
As 2009 draws to a close, Valley Bank President and CEO Ellis Gutshall said he is pleased with the bank's deposit growth this year and is taking steps to sustain it.
"The success of our MyLifestyle Checking and our Prime money market products has been exceptional over the last 12-15 months," he said.
The MyLifestyle program offers checking account holders interest of 5.01 percent a year for meeting certain account-activity requirements. As a new alternative, account holders can collect their rewards in the form of gift cards good for iTunes music downloads.
Charles Robbins, a Roanoke-based regional president for BB&T, said his bank is a Southwest Virginia market leader in spite of the recent report showing a slight drop in BB&T's market share in the Roanoke and New River regions.
He said banks posting market-share gains probably have been paying above-market interest rates on certificates of deposits. BB&T could do the same thing but isn't. It has plenty of deposits to lend as is, Robbins said.
Asked if he thinks community banks have gained any ground on big banks, he said the evidence is inconclusive.
"I think we're very fortunate in Southwest Virginia that we have a lot of good banks. That's very good for businesses and consumers," Robbins said.
