Banking On It: Local deposits up 30% from 2009

Financial institutions have long competed for deposits using a variety of lures, including promotional interest rates, tote bags and toasters.

Frankfort-based State Savings Bank, which entered the Traverse City market last year, even offers a free pie to anyone who switches a checking account from another bank.

But a new incentive could be driving consumers to stash more cash in local banks and credit unions: fears that the economy is heading for a downturn after the longest stretch of growth in U.S. history.

One local credit union executive said he’s starting to see consumers saving more in preparation for what he thinks could be a looming recession.


“We see the economy continuing to chug along at an extremely slow pace,” said Andy Kempf, president of 4Front Credit Union in Traverse City. “We think there could be a recession in 12 to 24 months. We’re getting ready for one.”

Where the economy is heading is debatable, but Kempf said he’s seeing some evidence that consumers are starting to worry about the future of their jobs.

That sentiment also was expressed in the University of Michigan’s national monthly survey of consumers in October. While consumers remain largely confident about current conditions, multiple economic uncertainties, including the U.S. trade war with China, could “significantly weaken” future job and income prospects, the survey found.

Kempf said deposits at 4Front, which has 15 offices in northwestern Michigan, are up 12% this year to about $60 million. He attributed part of that increase to competitive rates, including checking accounts that pay 4% annual interest.

TBA Credit Union in Traverse City is experiencing similar growth. Deposits, including savings and member share accounts, jumped to $182,199,696 last year, a $10.3 million increase from deposits of $171,894,874 in 2017, according to the credit union’s annual report.

Deposits are important to banks and credit unions, which need them to fund loans. That’s been particularly crucial over the past decade because of the Grand Traverse region’s rapid economic growth.


“We’re always seeking deposits,” said Mike Worden, president of Honor Bank, which boosted deposits to $44.8 million as of June 30 from $43.7 million last year.

Chemical Bank, the second-largest bank operating in Grand Traverse County, also is seeing a big increase in deposits. The bank posted an $18.5 million rise in deposits in the county between June 30 of this year and the same date last year, according to Federal Deposit Insurance Corp. data.

Chemical, which recently acquired Minnesota-based TCF Bank and is in the process of changing its name to TCF, had $492 million in Grand Traverse County deposits as of June 30.

Banks are required to report deposit data annually to the FDIC on a county-by-county basis every June 30. Credit unions do not report similar data to their regulatory agencies, Kempf said.

Scot Zimmerman, Chemical’s local president, attributed his bank’s deposit increase to aggressive savings rates.
“We offered special rates on CDs (certificates of deposit) and money market accounts multiple times over the past year,” he said. “I think that paid off.”

Unlike Kempf, Zimmerman said he doesn’t see an economic downturn in the short term, but said local loan growth has slowed somewhat. He’s looking for continued growth next year, in part because President Donald Trump is seeking re-election.

“We all know government works very hard to make sure the economy is good during an election year,” he said.

Chemical also has pulled closer to perennial market leader Fifth Third Bank in deposit market share. Chemical’s market share jumped to 20.6% this year from 19.9% last year, while Fifth Third’s deposit market share fell to 22.9% from 25.4% in 2018.

Fifth Third, with $547 million in deposits in Grand Traverse County, had $129.4 million more in deposits than second-place Chemical last year. But that gap has narrowed to $55 million this year.


David Shooltz, Fifth Third’s northern Michigan market president, attributed the decline largely to major commercial customers moving money into deposit products, such as bonds and those linked to treasury rates, that aren’t covered by FDIC insurance and aren’t counted in the regulatory agency’s market share data.

Independent Bank, which acquired Traverse City State Bank in 2018, lost 1.6 percentage points of market share in Grand Traverse County this year, falling to 7.8% from 9.4% this year. Independent is the fifth-largest bank in the county with deposits of $186.3 million.

Marc Judge, Independent’s vice president of community banking, said most of that decline is a result of a program that allows customers with accounts above the FDIC’s $250,000 insurance limit to spread deposits to other banks.

Those deposits, mainly from school districts, local units of government and large businesses, continue to be managed by Independent.

Although Independent, the fifth largest bank in the county, lost some local customers when it acquired Traverse City State Bank, Judge said it has since seen “an influx of new clients moving more funds to us.”


There was no change in the market share ranking 11 banks that were operating in Grand Traverse County over the past two years. Newcomer State Savings Bank opened last year after the 2018 figures were released by the FDIC. State Savings Bank reported deposits of $15.9 million in Grand Traverse County this year.

Deposits overall for commercial banks operating in the county continued the tepid growth seen over the past several years. Banks had $2.39 billion in deposits as of June 30, compared to $2.38 billion a year ago.

Local bankers attribute the sluggishness to a variety of factors, including increased competition from credit unions, brokerage firms and online financial institutions.

The number of banks operating in Grand Traverse County – 12 – is the same as it was in 2009. But deposits have jumped 30 percent in the past decade, reflecting the area’s population and economic growth.