Business News from the City of Traverse | Cash Floods: Bank and Credit Union Deposits Increased 58% Thanks to COVID-Linked Stimulus Payments

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Cash Floods: Bank and Credit Union Deposits Increased 58% Thanks to COVID-Linked Stimulus Payments

Local banks and credit unions are inundated with money from retail and business customers who embezzled federal stimulus payments during the COVID pandemic.

Bank deposits in Grand Traverse County have jumped 58% since the months before the start of the pandemic, from $ 2.4 billion on June 30, 2019 to $ 3.8 billion on the same date this year. This is according to an annual report on deposits from the Federal Deposit Insurance Corp.

There are 11 banks serving customers from 30 offices in Grand Traverse County. It is one bank less than a year ago, thanks to the acquisition of TCF Bank of Detroit, based in Columbus, Ohio.

Plumstead

“Businesses have had a good year and the money supply has grown dramatically during the pandemic,” said Norm Plumstead, President and CEO of Honor Bank. “We can thank the government for (increasing the money supply), for better or for worse.”

Local credit unions also hold record amounts of depositors’ money. TBA Credit Union, for example, had deposits of $ 222.6 million as of June 30, up 17% from $ 190.4 million on June 30, 2019.

Browne

“We have seen tremendous growth in deposits,” said TBA President and CEO Karen Browne, adding that deposits are stabilizing as improved federal unemployment benefits and other COVID-related programs have increased. ended.

But Browne and others predict they will see continued and healthy growth in deposits for the foreseeable future as the economy slowly recovers from the pandemic.

Deposits at 4Front Credit Union increased from $ 466.3 million on June 30, 2019 to $ 754.7 million on the same date this year, an increase of 62%.

“We are only growing,” said Andy Kempf, President and CEO of 4Front. “We have seen membership growth of 7% this year and we forecast deposit growth of 10% for 2022.”

Kempf

Information on local credit union deposits was taken from the financial statements submitted to the National Credit Union Administration. The NCUA, which regulates credit unions, does not produce an annual deposit report similar to the FDIC deposit report.

Deposits made in Grand Traverse County at Cincinnati-based Fifth Third Bank have grown from $ 547.2 million in 2019 to $ 734.2 million this year, an increase of 34%. But unlike the 10 other banks taking deposits in the county, Fifth Third saw its deposits decline by $ 810.1 million in 2020.

There is good news in this decline. Much of the decrease in deposits is the result of Fifth Third’s commercial clients starting to withdraw cash and fundraising transactions as the economy improves, said Autumn Gillow, head of the northern market. of Michigan from Fifth Third.

“While there is certainly a lot of excess liquidity on balance sheets, we are starting to see some movement in spending” from business customers who make up a large part of Fifth Third’s deposit base, “he said. she declared.

Business customers typically use about 40% of their lines of credit, but that was halved during the height of the COVID pandemic, Gillow said. The use of lines of credit is now around 28%, she said.

Fifth Third also offers its clients alternative investments with higher returns than traditional deposit accounts. These investments are not included in the FDIC filing data.

Gillow

Gillow said Fifth Third has also lost business customers acquired by out-of-town companies.

“Over the past 12-24 months we have seen a significant increase in M&A activity with the acquiring company located outside of the region,” she said. “In these cases, banking and deposits often follow the acquiring company. “

Fifth Third has been the local repository leader for years. But last year’s acquisition of TCF Bank by Huntington Bank knocked Fifth Third off its high ground. Huntington now controls 40.7% of all bank deposits in Grand Traverse County.

Fifth Third fell to second place, with a 19.5% deposit market share.

Huntington also broke the $ 1 billion mark with $ 1.53 billion in local deposits as of June 30, up 53% from the $ 999 million in combined Huntington-TCF deposits in 2020.

The bank refused to make Scot Zimmerman, its northern Michigan region president, available for an interview. Huntington announced in November that Zimmerman will be leaving the bank at the end of the year when the northern Michigan region is consolidated into the Great Lakes Bay and Mid-Michigan regions, led by Nick Florian.

Bryan Carson, Huntington’s executive vice president for Columbus-based deposit products, cited the bank’s wide range of offerings and number of branches, in addition to COVID impacts, for its rapid growth in the Northwest from Michigan.

“Location still matters,” he said, despite a consumer shift towards online banking. “(As a result of the acquisition), (we) have 35% of the branches in the market. “

Some of Huntington’s competitors say they are unfazed by Huntington more than tripling its local deposit base after swallowing the TCF last year.

“We provide exceptional service to our customers and will continue to do so,” said Gillow. “We are hiring new people. We are doing what we have always done.

Executives of several small independent banks have said they are attracting new customers tired of the madness of large bank mergers that has in some cases resulted in the loss of local decision-making over loans and other banking services.

“It is well known that there has been – and continues to be – widespread customer dissatisfaction with the ongoing merger / acquisition activity,” said Doug Zernow, director of marketing at State Savings Bank. “After a while, customers get bored and start looking for alternatives.

“Many of them have found their way to us.”

State Savings Bank, which entered the Traverse City market in 2018, has tripled Grand Traverse County deposits in the past two years from $ 15.9 million in 2019 to $ 48.1 million to June 30.

The bank is also expanding into County Leelanau, where it recently received regulatory approval to expand a credit bureau in Suttons Bay into a full-service branch, Zernow said.

The Ludington-based West Shore Bank also expanded to Traverse City in 2018 with a single branch and built a second 40,000 square foot office at the intersection of Eighth Street and Boardman Avenue.

West Shore has quadrupled the Grand Traverse County deposits since 2019, from $ 9.7 million that year to $ 38.8 million on June 30.

Van Slyke

Syd Van Slyke, senior vice president of West Shore and local market leader, attributed part of the increase to customers depositing their pandemic-related stimulus funds. He added that the bank has also seen “a significant amount” of new non-COVID-related business in the past 24 months.

“We have found that the changes taking place in other local institutions have left a void for a good, strong, full-service community bank,” said Van Slyke.

Banks need deposits to fund loans. But the explosion in deposits resulting from the COVID pandemic has left it with great difficulty finding enough borrowers to deploy all the money.

Auto loans, for example, are on the decline due to a microchip shortage that has reduced auto production and left dealerships with few new cars and trucks to sell.

“It’s a big part of our business,” said Browne of TBA.

The wild card is whether recent price inflation will continue, causing the Federal Reserve to raise interest rates. Such a move could further depress lending.

But several executives of local financial institutions expect little to no rate movement over the next year.

Higher interest rates would increase borrowing costs for the indebted federal government and hurt the U.S. economy, 4Front’s Kempf said.

“We don’t see the Fed raising rates,” he said. “They won’t be able to do it.

Browne said the increase in bank deposits is part of a fundamental shift in the U.S. economy brought on by COVID.

“The pandemic has completely changed everything,” she said. “I thought we would be back to normal in a short period of time, but I don’t think we’ll ever go back to what we were before COVID.”

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