No Flood of New Money: Deposits flat at TC banks

Rising interest rates have been a boon to savers, who have seen little return on their savings accounts and certificates of deposits at banks and other financial institutions in recent years.

“Rates were so low, you almost expected some banks to charge people to keep their money,” said Doug Zernow, marketing director of Frankfort-based State Savings Bank, which recently opened a full-service office in Traverse City.

But numbers tell a different story: Grand Traverse County banks have not seen a flood of new money from depositors pouring into their vaults. Deposits at the 11 banks serving the area are nearly flat compared to a year ago, according to an annual deposit market share report by the Federal Deposit Insurance Corp.

Local banks had $2,377,637,000 in deposits as of June 30, according to the FDIC. That’s up just $531,000 from the same date a year ago.

That could reflect stiff competition for deposits from other types of institutions, said Scot Zimmerman, Chemical Bank’s community bank president.


“We continue to see competition from money market accounts, online banks and credit unions,” he said.

Year-over-year results varied among banks. Deposit market share losses were concentrated in four banks: perennial market leader Fifth Third, Chase Bank, Independent Bank and mBank, which has a tiny presence in the local market.

Fifth Third saw deposits decline from $628,261,000 in 2017 to $602,944,000 this year, dropping its market share from 26.43 percent to 25.36 percent.

Fifth Third Northern Michigan Market President David Shooltz said the biggest reason for the deposit loss likely was business customers taking money out to fund equipment and capital purchases in a strong economy.


“You’re seeing steady growth for most of our clients,” he said. “Some are making movements now to buy equipment and take advantage of tax write-offs in the new federal tax law.”

Independent Bank, which moved into the local market by acquiring Traverse City State Bank in April,  saw its deposit market share fall from 10.47 percent in 2017 to 9.4 percent. But it retained Traverse City State Bank’s 2017 ranking as the fifth largest bank in Traverse City.

Deposits at Independent fell from $248,897,000 last year to $223,595,000 this year, a loss of $25,302,000. But the bank merger had little to do with the deposit decline, said Connie Deneweth, who heads Independent’s northern Michigan market.

Deneweth said the bank lost only two accounts in the merger. She said Independent has “a significant concentration of title company deposits and public funds,” and those deposit balances were lower on June 30 than they were on the same date a year ago. That reflects normal fluctuations in those balances from quarter to quarter, she said.


“Those two categories can swing deposit totals significantly at the end of the quarter you’re measuring,” Deneweth said.

Chemical Bank, the second-largest bank in the county, boosted its market share from 18.67 percent in 2017 to 19.92 percent this year. Chemical Bank had deposits of $473,527,000, up from $443,815,000 in 2017.

Zimmerman said Chemical Bank is competitive with other institutions on deposit rates, although it doesn’t necessarily aim to be the market leader on what it pays to attract deposits.

“It’s competitive as heck,” he said. “You’re constantly looking at rates on deposits; trying to keep track with rates we’re seeing across the board.”

Chase Bank, which last year was the third largest bank in Grand Traverse County, fell one spot this year and was replaced by Huntington Bank, which was the county’s fourth-largest bank in 2017. Chase Bank’s deposit market share fell from 17.02 percent in 2017 to 16.03 percent this year, while Huntington’s share rose from 15.79 percent last year to 16.39 percent this year. Officials of the two banks couldn’t be reached for comment.

While bank deposits overall in Grand Traverse County were flat this year, local banks say they are sufficient to fund the strong loan growth they’re seeing. That growth, they say, is particularly pronounced among business clients.

“They’re adding a division, leasing additional square feet in their office buildings, buying new machinery and equipment, and acquiring smaller businesses,” Deneweth said. “It’s exciting. It wasn’t that way five years ago.”

And higher interest rates on loans aren’t deterring businesses from borrowing and investing, local bankers say. Nationally, the prime rate banks charge their most creditworthy customers has jumped from four percent in March of last year to 5.25 percent in September, according to the Wall Street Journal.

“There’s been no slowdown in borrowing,” Shooltz said. “Most clients consider rates to still be quite attractive.”