- The Washington Times - Thursday, May 23, 2002

Major banks in Washington have slowly but steadily been losing customers to the area's numerous local credit unions and community banks, which often offer fewer fees and lower loan rates.
SunTrust Bank's market share slipped by 3.4 percent to 10.1 percent between 1999 and 2001, according to the Federal Deposit Insurance Corp. Bank of America's presence fell 1.5 percent over the three years, Riggs National Bank dropped 2.1 percent and BB&T; decreased 0.3 percent.
Wachovia/First Union was the only bank to see its deposits remain stable at 8.7 percent market share in 1999 and 2001.
The decline in market share "is not overwhelming, but is significant," said Arnold Danielson, a local banking analyst. "Most of it has gone to new, smaller banks that have opened in the last six or seven years."
Community banks have made great strides in attracting small-business customers and individuals who did not want to join big banks.
The trend runs counter to the national banking market, where deposits increased 18 percent to $4.56 trillion in 2001 from $3.86 trillion in 1999.
Banking analysts say the Washington region is different because the market is more fragmented than other metropolitan areas around the country.
"This market offers much more choices for consumers," said Sandi Dunleavy, consumer executive for the regional division at Bank of America, which locally has 141 banking centers and 354 automated teller machines (ATMs).
Typically, two or three large banks control most of the market in metropolitan areas. But in Washington three national players Bank of America, SunTrust and Wachovia face stiff competition from sizable regional banks, such as First Virginia Banks, Allfirst Bank, Riggs National Bank and BB&T.;
The region also offers a wide variety of credit unions created for federal employees and contractors. Credit unions are a particularly tough competitors for national banks because they offer mostly fee-free checking and savings accounts, and because their interest rates are often more favorable.
"Credit unions are tax-exempt organizations that are competing with the banks, which are highly taxed," said Kathleen Carr, president and chief executive of the Adams National Bank, a D.C.-based community bank with five branches and eight ATMs.
Deposits at the bank rose 11 percent to $153 million last year, up from $138 million in 2000, Ms. Carr said.
Online banking is also fueling competition because of its transient nature. A customer with an account at a small California bank, for instance, doesn't have to switch to a national or local bank if his bank offers online banking services, she added.
"The decreased local-deposits rate is a product of the banking industry consolidation process," said Bert Ely, a local banking analyst. "With the exception of Riggs, all the banks in this region have been through acquisitions in recent years. Generally, when that happens, you get customer fallout because branches get closed and consolidated or there's a systems-conversion [problem] and the customer isn't happy."
Credit unions have gained many of those unhappy with the large banks, said Mike Schenk, vice president of economics at the Credit Union National Association.
"We have seen just in the recent past some fairly large inflows of deposits into credit unions," he said.
Nationwide, deposits at credit unions rose to 8.6 percent from 8.3 percent between 2001 and 2000. Meanwhile, deposits at commercial banks slipped from 53.4 percent to 53.3 percent, according to the Federal Reserve.
Another reason for the shift in market share may be the economy.
"The stock market didn't do well in 2001 and whether people pull money out of the stock market or let it in at a slower rate, both credit unions and banks benefited from that behavior," Mr. Schenk said.
Although big banks are losing market share in their traditional banking services to smaller banking institutions, they are not worried, Mr. Danielson said.
"They think they are doing pretty well," he said. "They are getting bigger and getting the business that they want."


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