Slowing Economy, Shift to Other Investments Cited for Slowdown
Deposit growth at OC’s largest 24 banks has slowed almost to a standstill, which bank officers attribute to a slowing economy and the movement of depositors’ dollars to other investments.
Overall, the 24 commercial banks on this year’s Business Journal list had a modest 2% growth in Orange County deposits for the 12 months ended June 30, the last period for which FDIC data is available. That compares with growth rates of 5% in the prior 12 months and 12% in the period before that.
Most of what deposit growth there was occurred at the top three banks,Bank of America, Wells Fargo Bank and Union Bank of California,which together hold 70% of the total deposits on the list and accounted for $302 million of the $368 million overall increase in deposits.
“Any time you go through an economic cycle, cash flows decrease and you expect deposits to be affected,” said Brad Dinsmore, a market president for No. 1 Bank of America. Deposits also decrease when customers put their money into other investment vehicles, something that has been happening for the last three years.
It’s a trend that was mirrored on the Business Journal’s recent list of savings and loans and exemplified by Seattle-based thrift Washington Mutual. Its OC deposits have dropped $1 billion in the past two years as a result of the phenomenon. And as interest rates decrease, banks can find cheaper sources of money than the offering of certificates of deposit, thus turning off customers from using such vehicles.
To increase deposits in the coming years, banks will have to get more aggressive in marketing and introducing new products. Consolidation in the banking industry has left the local landscape with no banks larger than three branches to acquire, forcing the remaining big banks to turn to fundamental methods of growing business.
“It’s a competitive landscape. It remains fiercely competitive The potential acquisition targets have diminished greatly and it is back to basics,” said Dallas Haun, a regional senior vice president for City National Bank.
Bank of America still holds the largest market share in the county, with $7.52 billion in deposits, a 2% increase from last year. This also reflects the Charlotte, N.C.-based bank’s dominance on the West Coast. The bank holds the largest share of the California market and plans to keep on rolling.
“We are still focused on growing,” Dinsmore said.
Bank of America restructured its management last year to bring more autonomy to local operations, so the bank can get closer to its customers. So far it is working, according to company officials.
“We are seeing loan volumes at their highest point in 18 months and investments are growing. Consumer loans are the fastest-growing area,” Dinsmore said. The bank also added another branch in Orange County and the bank is planning to hire more people and open new private bank offices across the state.
No. 2 Wells Fargo Bank did not change its local employment but grew its deposits 3% to $4.6 billion. Kim Young, the bank’s local head of operations, attributed the slowdown of growth to a shifting of investment out of deposit products. But Young said the bank is gaining deposits through its online operations, which are held outside of Orange County. With the bank’s merger with Norwest Corp. now completed, Young said the bank will concentrate on growing its market share.
Deposits at No. 4 Sanwa Bank dropped 5% last year as a result of a focus by the bank on other sources of funds, said John Doyle, a first senior vice president. Doyle said that though deposits in the county dropped, the bank actually gathered more local customers. Sanwa opened a new branch in Irvine last year and plans two more in the county this year.
Comerica grew its deposits by 20% last year, bringing it up three slots to No. 5 this year with $575 million in deposits. David White, Comerica’s local chief, said the growth was due to both an increase in deposits by existing customers and landing new relationships. The bank should move up a couple more spots on next year’s list, since it just finished the acquisition of No. 7 Imperial Bank, which had an 8% growth in deposits to $507 million.
Eldorado Bank moved up one spot to No. 6 despite dropping $55 million in local deposits. Bank officials said it lost deposits when it sold off its wholesale mortgage business last year. Bob Keller, the bank’s chief executive and president, said the bank did very well last year and, except for the sell-off of the mortgage division, its core deposits grew 10%.
Eldorado will not be on the list next year, since Zions Bancorporation announced it will acquire the Laguna Hills-based bank and merge it into its California Bank & Trust operation, which has six branches in Orange County and 74 in California. California Bank & Trust has $478 million Orange County deposits, good for No. 8 on the list.
Minneapolis-based U.S. Bank dropped six spots on this year’s list to No. 10 because its local deposits fell 43% to $422 million. The drop is accounted for by a move in deposits from one of its Newport Beach branches into a banking center that bank officials said does not report the deposits to the FDIC. Outside of that move, the bank has been growing in the Southland and has added customers in Orange County, said David Rainer, U.S. Bank’s president of the Southern California operations.
No. 12 City National Bank moved up two spots this year with a 12% growth in deposits to $316 million, which company officials attributed to its business development program.
“Our numbers in Orange County reflect a terrific team,” Haun said.
No. 19 Sunwest Bank, the largest remaining OC-based bank, grew its deposits by 10% last year to $160 million. The bank’s chief executive, Jim LeSieur, said the growth is due to continued marketing in the region. n
