Local Banks Grow at BofA's Expense; Commercial Lending Still Flat

When over 100 people came to protest in front of the Bank of America downtown on Saturday, economic inequality and worry that banks were taking advantage of consumers were high on the list. 

Bank of America made itself an easy target for the when it announced on September 29 that customers would be charged $5 per month for debit card use.

After much criticism, this Tuesday Bank of America cancelled its $5 debit fee program. Still, the damage was done and will continue with National Bank Transfer Day, set for this Saturday, Nov. 5.

While not directly associated with the Occupy movement, the day is a Facebook campaign urging people to switch from national to local banks and credit unions and was started by Los Angeles gallery owner Kristen Christian.

“The ideal protest to engage in is with your money,” said Robin McKenzie, a spokeswoman for Redwood Credit Union, which in October opened 500 new accounts for former Bank of America customers. In September, that number was 180.

Other credit unions report similar trends.

“It’s the best month we’ve had in months,” said Vice President of Marketing David Williams of Community First Credit Union. “People have begun to realize that it matters where they park their money.”

Williams was at the WordUp! Fair at the Sonoma-Marin Fairgrounds last Sunday, and even though the credit union has no Petaluma branch, was still signing up new accounts.

Credit unions have seen strong growth during the economic downturn, mainly because many didn’t suffer the same over-leveraging and lending issues faced by traditional banks. It also helps that the credit unions have been educating the public on their appeal, McKenzie said.

Redwood has 28,000 ATMs around the country, relying on a cooperative network of machines. They also offer credit cards.

Credit unions aren't the only ones growing. Exchange Bank, AtlaPacific Bank and Summit State Bank, all local banks, also grew deposits in the past year. According to their quarterly reports, Atla grew deposits by 34.3 percent for the quarter and 71.1 percent for the first three quarters of the year; Summit saw 24.5 percent growth in total deposits.

“At the beginning of the year, our high estimates predicted 20 percent increase [for the year],” said Summit President and CEO Tom Duryea. “We now expect 30 percent.”
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While banking accounts and deposits are up, commercial lending to Sonoma County businesses has remained flat for most banks, with Redwood Credit Union possibly the only exception.

“Sonoma County is doing better than your average bear out there,” said Summit's Duryea. “But overall, lending is flat for the country and for the state.”

Summit has been keeping its total business lending up by financing not-for-profit business, having gone from eight businesses with $220,000 loaned in August 2009, to about 86 nonprofits and $11 million today.

“We’re about local,” Duryea said. “We want to help our local community, our local businesses.”

Demand has been low, said Duryea, but the bank will begin a program, with about $50 million earmarked, for small businesses lending.

Redwood, too, said it’s been growing its commercial lending by about 50 percent loaned per year since 2008. Federal law limits how much more growth it can do, though, as credit unions are only permitted to put 12.25 of total assets to commercial loans.

“We’ll cap out within in two years,” said McKenzie. “That means we will be prohibited from lending to our local businesses.”

A law has been floating around the U.S. Congress for years to increase that limit to 25 percent, but little traction has been made as major banks have found ways to block it.