by Gigi Wood and Tim Kenyon
CORRIDOR – Whether bank customers are actually moving their money locally is unknown.
What is clear is many Americans, including Iowans, are frustrated with large, corporate banks and the large bailout funds those businesses received from the federal government.
In response, Arianna Huffington and others spearheaded the Move Your Money initiative, asking people to transfer their funds from accounts in large banks, such as Bank of America, JPMorgan Chase, Wells Fargo and others to smaller, community banks.
In Eastern Iowa, many bankers know of either the initiative or customer frustration with large banks, but are unsure if it is directly translating into new customers.
“There certainly is a segment of the population frustrated with large national and global banks and their egregious compensation packages,” said Jeff Disterhoft, president and CEO of the University of Iowa Community Credit Union.
He doesn’t know whether the credit union has new customers because of that frustration, but said the credit union’s earnings were up 53 percent last year.
Collins Community Credit Union President and CEO Rick Benhart said he is not familiar with the Move Your Money initiative. However, he said a pattern exists of more money funneling back to local financial institutions.
The larger holding banks aren’t as interested in consumers right now, so local community banks and credit unions are benefitting, he said.
“They do look to where decisions are being made rather than big holding bank where you call U.S. Bank or a Wells Fargo and your call goes into a phone bank that who knows where those people are at,” Mr. Benhart said. “They don’t know the community as specifically as well as we do.”
Local financial institutions are also gaining from people opting for local investment markets as they remain leery of putting it back into the stock market just yet, he said.
Deposits grew about 12.5 percent in 2009 at Collins, Mr. Benhart said. DuPaco community credit union was another with tremendous growth.
Bart Floyd, president of the Iowa City market U.S. Bank, 204 E. Washington St., said the Move Your Money initiative is misguided. Last year for example, U.S. Bank contributed to 60 charitable organizations and 69 employees volunteered 1,134 service hours to the community, he said.
“I think it’s people who don’t really have knowledge of the banking industry saying, ‘Big is bad, small is good,’ and that’s not an accurate statement,” he said. “We fall into the category that’s larger, but we’ve been tested just as thoroughly or more thoroughly as any bank in America and we ranked No. 1 in terms of the government stress-tests, which tested the 20 largest banks. There’re smaller banks that haven’t been tested to that degree. Just because they’re a certain size doesn’t mean you know their financial strength or if they’re in trouble or not.”
There is another banking trend that is driving customers to large banks, he said.
“There’s this concept out there across the United States that people are not necessarily sure if their bank is strong and if it will go under,” Mr. Floyd said. “So there’s this concept called “flight to quality,” where people are saying, ‘I need to move my money to a bank that is safe.’ And we’ve actually grown a lot because of that concept.”
U.S. Bank has 102 branch locations in Iowa, a testament to its willingness to compete with local banks, he said.
“I can’t speak for other big banks, but we here at US Bank we cater our product offerings to the local communities in which we compete in,” he said. “We’re not here competing against JPMorgan Chase, we’re here competing against Hills Bank or MidWestOne, and our fees are not the highest in town and their not the lowest, we tend to be middle of the pack. And the fees are basically paying for a service. We consider ourselves of financial quality and we don’t shortchange ourselves, so we get paid for quality.”
The largest national banks are not a dominate players in the Eastern Iowa financial sector, another banker said.
“So much of our community has already been very supportive of the community banks for so long and I think they view the community banks as supporting the community, whether it’s us providing donations financially or people time and the different things we get involved in,” said Todd Means, vice president and central region retail manager for MidWestOne Bank. “We need to support the communities we’re in and I think the communities have supported us in return.”
He said he hasn’t heard of new customers due to the initiative, but the bank has managed itself well and avoided the problems of the larger banks.
“We’ve made a lot of the right decisions,” Mr. Means said. “You don’t see the foreclosures here like you do nationally. You don’t see the bank failures like you do nationally. In general we’ve been pretty smart with how we’ve managed our business.”
For more information on Move Your Money, visit http://moveyourmoney.info.