Eastside residents and businesses who bank with Washington-based banks seem to lean local when deciding where to put their money, judging from deposit market share reports from the Federal Deposit Insurance Corp.
For example, Everett-based Coastal Community Bank had the largest share of deposits in Snohomish County among Washington-based banks, at 6.21 percent of all county deposits as of June 2019, the latest annual data available. Bank of America had the most deposit share in the county, at 21.75 percent, followed by JPMorgan Chase and Wells Fargo, with Coastal Community No. 4 overall. The next-highest Washington bank, also based in Snohomish County, was Mountlake Terrace-based 1st Security Bank of Washington, with 4.19 percent of the county’s deposits.
Correlations between locally based banks appear in the larger King County market, with two Seattle-based banks, HomeStreet and Washington Federal, holding the most deposit share among Washington-based banks, at 3.54 percent and 3.36 percent, respectively. It’s the first time HomeStreet has held the top spot in the county among Washington banks, according to Paulette Lemon, executive vice president of retail banking for HomeStreet, a West Coast regional bank with 63 offices, a third of them in King County.
“It’s an honor and privilege to be ranked first,” Lemon said. “It means that we have earned the trust of a significant number of customers.”
Bank of America and four other national banks held the top five overall spots in King County. Bank of America also had the most deposit market share statewide, 20.75 percent. Major national banks, with their national branches and ATM networks, hold significant deposit shares in big markets like King and Snohomish counties. That’s due, in part, to large national companies that might have banking needs throughout the country and tap national banks’ broad network for their large commercial deposit needs.
Responding to Bank of America’s deposit market share ranking, Kerri Schroeder, the bank’s Seattle market president covering King, Snohomish, and Pierce counties, said: “Bank of America’s legacy dates back to Dexter Horton first protecting people’s money in coffee barrels at his mercantile, and then later going on to open Seattle’s first chartered bank. For 150 years, we have served the needs of our Puget Sound area clients, and being the largest bank in the region and state for a significant portion of this time is an honor and privilege we have cultivated by serving the needs of our clients and the communities where we operate. At every stage of our growth, we have prioritized products, services, and innovative technology that delivers security and convenience to make our clients’ financial lives better.”
Tacoma-based Columbia Bank had the most market share statewide among Washington-based banks.
Chris Merrywell, Columbia Bank’s chief operating officer, said the bank reviews the data annually when they’re released and added, “We are pleased with our rankings and our growth over the years. Our rankings demonstrate our continued growth and strength relative to our peers.”
Joel Edwards, chief financial officer at Coastal Community Bank, said bankers pay attention to the deposit reports, comparing their deposit growth to the overall market and peers. The bank nudged ahead of U.S. Bank from 2018 to 2019 and hopes to continue growing its deposits, he said.
While some customers might be aware of a bank’s local headquarters and be influenced by that, “I think what customers may see more is the presence of a financial institution in the community and how often they see the individuals from that institution,” Edwards said.
“The biggest thing — this is for all community banks — is that the decisions are so much more local, they can get to the decision maker,” which Edwards believes makes a difference to business leaders.
Banking is a relationship business, he said.
That’s a common refrain among Puget Sound bankers.
“We’ve built our business on relationships, and we’ve built them one customer at a time,” HomeStreet’s Lemon said. “We have also built a branch network with branch managers who are deeply connected within their communities; our branch manager team is empowered to connect with community leaders and participate on nonprofit boards.”
HomeStreet has a culture of doing the right things for its customers and employees, she said, “and I think that connects very well with the region and why the customer base has grown.”
Edwards also cites Coastal Community Bank’s community involvement, with employees serving on boards of 56 different local nonprofit organizations and contributing substantial hours in the community — all things people notice, he said.
“That’s where we’re a community bank,” Edwards said. “The bigger banks — they participate in the same stuff, but we’re just always here.”
Bank of America cites local connections as well. In Pierce, Thurston, Snohomish, and King counties since 2014, it reported $11 million in grants and matching gifts, $3.1 million in employee donations to local nonprofits and community needs, and 85,000 employee volunteer hours.
When looking beyond the Eastside specifically, the Seattle-Tacoma-Bellevue metropolitan statistical area showed Tacoma-based Columbia Bank had the most deposits among Washington-based banks, at 3.51 percent, followed by HomeStreet at 3.15 percent and Washington Federal at 3.09 percent. Bank of America was first overall.
West of King County, in Kitsap County, Port Orchard-based Kitsap Bank led Washington-based banks in market share, at almost 20 percent, second only to Bank of America at 23.43 percent.
No surprise: King County’s 528 bank offices, with $87.3 billion in total deposits, hold the majority of Washington’s deposits, at 53.07 percent. Snohomish County’s 171 bank offices comprised the second-most deposits in the state: $12.5 billion, or 7.59 percent of the state’s total deposits.
Coastal Community had the most offices in Snohomish County among Washington banks: 11. In King County, Washington Federal, with 29 offices, and HomeStreet, with 21, had the most branches among state-based banks.
Philip Bond, University of Washington professor of finance and business economics, whose academic expertise includes financial institutions, said physical branches still matter in this day of electronic banking, but probably less on the deposit side and more on the lending side.
“Banks lend differently to people close to them than to borrowers who are far away,” Bond said.
For example, it’s easier for a branch manager to visit a business to get a sense for how well it’s doing, collecting what Bond called “relatively soft information” that supplements hard economic data. Whereas the more remote the loan is, the more the bank will tend to rely on hard accounting information, “and that sort of shifts the pool of projects it’s willing to finance, often away from, say, small businesses who are less able to produce convincing accounts of how well they’re doing.”
Deposits matter for lending since banks will lend money that’s been deposited, gaining a higher interest rate on the loan than it has to pay in interest on the deposit.
Coastal Community’s Edwards said deposits are its main funding source for loans in the community. Since 11 of its 14 branches are in Snohomish County, that’s where it primarily lends. “This is our marketplace.”
HomeStreet’s Lemon said the physical branches are important. “The electronic services and technology, of course, matter, and it’s important that we keep current with big banks and our technology,” she said. “However, the branch network provides the opportunity to connect … with people, which, again, is the value that the bank brings to the community.”
Bank of America, which in January reported becoming the first financial services company to be both mobile app- and online banking-certified by J.D. Power for providing “an outstanding customer experience,” also has a big branch network in Washington, with 165 offices statewide, including 109 in King and Snohomish counties. In each market, it said, it strives to provide tailored solutions to fit customers’ needs, adding, “It’s how we make this large company personal and how we help our customers, clients, and communities thrive.”
Lakewood-based Sound Banking Co., with one branch in Lakewood, ranks as the smallest Washington-based bank in the Puget Sound region and second-smallest west of the Cascades (behind Longview-based Twin City Bank), with 0.03 percent of the state’s deposit share, or $47.9 million on June 30.
Ben Noble, president and CEO of Sound Banking, which is in its 30th year of business in Lakewood, doesn’t pay much attention to the deposit share reports as a one-branch “microbank.”
Sound Banking doesn’t get clients from marketing, but from word of mouth and relationships that come from a small environment, Noble said.
Noble’s bigger concern is what lies behind the market share reports: Banks that are consolidating deposit market share through acquisition of smaller banks.
“How does that impact people who could have deposit relationships with smaller community banks, (which) might be apt to lend to them under different circumstances than maybe a big bank that has a box you have to fit in?” he asked. “I am concerned about that.”