Consumer�s interest high at community banks

21 December, 2008

�Three years ago, the issue of 'how secure is my money?' was literally not on the consumer�s radar; today, the future viability of the nation�s largest banks is,� says a community banking expert

IT TOOK $4 gasoline to get my relatives to rethink about their driving habits. Similarly, it looks like a meltdown of the mega-banks and other financial institutions is prompting consumers to think about where they are putting their money, who they can trust and what results they should expect. And much of their hard earned cash is flowing into deposits at community banks:

According to the FDIC, banks with less than $10 billion in assets, community banks, have seen an increase in deposit growth this year from a -.77 per cent in Q1 to a positive 2.06 per cent in Q3. Larger banks witnessed a 3.81 per cent decline in growth of deposits for the same period.

The Federal Reserve reported that October deposits and lending at community banks outpaced the overall industry. Between October 1 and October 22, community banks saw deposits rise 1.1 per cent, or nearly $27 billion, to more than $2.4 trillion. For the same period, the nation’s 30 largest US chartered banks saw $44 billion, or 1.2 per cent of deposits, walk out the door, leaving them with less than $3.8 trillion.

’REWARDChecking’, a free checking account offered by more than 450 community financial institutions across the country, reported a 96 per cent jump in deposits in the third quarter of this year.

“Through products like ‘REWARDChecking’, community financial institutions are winning back customers from the faltering mega-banks and investment houses,” said Don Shafer, chairman of Bbancvue, a leading provider of products and consulting to community banking institutions. “Americans are indicating that they enjoy investing their money locally and they benefit from high yields, fiscal safety and customer service,” he said.

Higher yields on short-term deposits are certainly fueling interest in community banks. Month-to-month applications on CheckingFinder.com, a website that connects consumers with community financial institutions offering high-yield checking accounts, jumped 14 per cent from July to August, 46 per cent from August to September and 53 per cent from September to October. A small sampling of applicants on the site indicated nearly seven out of 10 were moving their funds to community financial institutions from large banks.

Examples of the yields found at community banks compared to those higher yielding shorter term deposits at mega-banks (as of December 15) includes:

Community Banks Yields Product
Community Bank of Pleasant Hill, MO 6.10 per cent High-yield Checking
First Robinson Bank, IL 6.01 per cent High-yield Checking
Legence Bank, IL6.01 per cent High-yield Checking
Community Bank of Raymore, MO 6.01 per cent High-yield Checking
Three Rivers FCU, IN 6.01 per cent High-yield Checking
Florida Central Credit Union, FL 6.01per cent High-yield Checking
Union State Bank/Bank of Atchison, KS 6.01 per cent High-yield Checking
Bank of Granite, NC 6.00 per cent High-yield Checking

Mega-banks

WAMU5.00per cent CD (5 years)
eLoan 4.75per cent CD (6 years)
Schwab 3.60per cent CD (18 months)
ING 3.75per cent CD (1 year)
HSBC 3.50per cent CD (1 year)
Countrywide (BofA) 3.10per cent CD (9 months)
eTRADE 2.25per cent CD (12 month)

“Three years ago the issue of ’how secure is my money?’ was literally not on the consumer’s radar; today, the future viability of the nation’s largest banks is,” continued Shafer. “Not so with community banking, a system that has endeared trust by its roots and not by its branches,” he adds.