South Sound residents and businesses who bank with Washington-based banks seem to lean local when deciding where to put their money, judging from deposit market share reports from the Federal Deposit Insurance Corp.

For example, Tacoma-based Columbia Bank had 18.57 percent of deposits inside Pierce County as of June 30, 2019, No. 1 among 24 institutions, including national banks, with branches in the county, according to the latest FDIC deposit market share report.

Chris Merrywell, Columbia Bank’s chief operating officer, said the bank reviews the data annually when they’re released and added, “We are pleased with our rankings and our growth over the years. Our rankings demonstrate our continued growth and strength relative to our peers.”

Major national banks do hold a significant share, though, in Pierce County, holding the next five spots after Columbia, and they dominate in major markets like King County, where they hold the top five deposit market share positions. That’s due, in part, to national branch and ATM networks, and to serving large national companies that might have banking needs throughout the country and tap national banks’ broad network for their large commercial deposit needs.

In King County — where Bank of America is No. 1 in deposit market share by a wide margin, followed by Wells Fargo, JPMorgan Chase, U.S. Bank, and KeyBank — Seattle-based banks HomeStreet and Washington Federal are the highest-ranked among Washington banks, No. 6 and 7, respectively.

Expanding from Pierce County to the Seattle-Tacoma-Bellevue metropolitan statistical (MSA) area, Columbia ranks No. 6 (at 3.51 percent of deposits), behind Bank of America, Wells Fargo, JPMorgan Chase, U.S. Bank, and KeyBank — but it has the most deposit market share among Washington-based banks.

The same applies statewide, where Columbia is No. 1 among Washington banks (at 3.5 percent), but seventh overall, with Oregon-based Umpqua Bank at No. 6. Bank of America is No. 1 among all banks.

Responding to Bank of America’s deposit market share ranking, Kerri Schroeder, the bank’s Seattle market president covering Pierce, King, and Snohomish counties, said: “Bank of America’s legacy dates back to Dexter Horton first protecting people’s money in coffee barrels at his mercantile, and then later going on to open Seattle’s first chartered bank. For 150 years, we have served the needs of our Puget Sound-area clients, and being the largest bank in the region and state for a significant portion of this time is an honor and privilege we have cultivated by serving the needs of our clients and the communities where we operate. At every stage of our growth, we have prioritized products, services, and innovative technology that delivers security and convenience to makes our clients’ financial lives better.”

Addressing the correlation between locally based banks and their share of the local market, Columbia’s Merrywell said there are many considerations clients make when choosing a bank, including the headquarters location.

“For Columbia, our track record of providing tremendous support in the community matters to our neighbors throughout the Tacoma market,” he said via email. “We are known to clients by our deeds, services, and support that we have provided for decades.”

Also, its Washington, Oregon, and Idaho client base appreciates the bank and what it offers, he said. “We firmly believe that while our address matters, so do our community impact and business relationships.”

Similar correlations between bank roots and markets appear in the Olympia-Lacey-Tumwater MSA, comprising Thurston County, where Olympia-based Heritage Bank is No. 1 among Washington-based banks, with a 13.42 percent share of the deposits, but No. 2 overall to B of A, which held a half-point edge in deposits as of June 30, at 14.02 percent. Olympia Federal Savings and Loan Association ranks No. 3, at 12.13 percent, among the MSA’s 17 banking institutions.

Nigel English, Washington and Oregon market president for Heritage, said the bank’s local market connections matter to customers, who appreciate local decision-making and the commitment to be involved and visible with local communities and businesses.

“It is a relationship approach at the end of the day — we pride ourselves on being a full-relationship bank, not a transactional bank,” English said.

Connection points to customers can be easier in smaller suburban-type communities, where bankers involve themselves on boards and in other ways, he said. “Those connection points really ultimately drive relationships and help bring in business.”

Bank of America cites local connections as well. In Pierce, Thurston, Snohomish, and King counties since 2014, it reported $11 million in grants and matching gifts, $3.1 million in employee donations to local nonprofits and community needs, and 85,000 employee volunteer hours.

Elsewhere around the South Sound:

In Grays Harbor County, Aberdeen-based Bank of the Pacific had the most deposit share, 32.10 percent, among all banks, followed by Timberland Bank of Hoquiam, at 28.58 percent, and 1st Security Bank of Washington, based in Mountlake Terrace, at 20.85 percent.

In Lewis County, Centralia-based Security State Bank was No. 1 among all banks, at 31.54 percent of deposits, followed by Columbia Bank at 13.51 percent, and Umpqua at 13.4 percent.

In Mason County, KeyBank was No. 1 among all banks, at 31.75 percent, followed by Columbia Bank at 21.2 percent and Heritage Bank at 16.49 percent.

“The deposit market share report is a helpful tool in benchmarking deposit share progress in our markets,” Columbia’s Merrywell said of the rankings, typically released each September for the year ended in June.

Looking at branch offices, Columbia Bank reported 19 offices in Pierce County on June 30, second only to Cleveland-based KeyBank at 24. Columbia had 75 offices statewide.

In the Olympia-Lacey-Tumwater MSA, Olympia Federal Savings and Loan and Hoquiam-based Timberland Bank had the most offices (seven each). KeyBank had six, and Heritage had five.

We asked Philip Bond, University of Washington professor of finance and business economics, whose academic expertise includes financial institutions/banking, whether physical branches still matter in this day of electronic banking.

Yes, but probably less on the deposit side and more on the lending side, he said.

“Banks lend differently to people close to them than to borrowers who are far away,” Bond said.

Source: FDIC. Deposits rounded;
Washington-based banks indicated in Pink with headquarter city in parentheses

For example, it’s easier for a branch manager to visit a business to get a sense for how well it’s doing, collecting what he called “relatively soft information” that supplements hard economic data. Whereas the more remote the loan is, the more the bank will tend to rely on hard accounting information, “and that sort of shifts the pool of projects it’s willing to finance, often away from, say, small businesses who are less able to produce convincing accounts of how well they’re doing.”

Deposits matter for lending since banks will lend money that’s been deposited, gaining a higher interest rate on the loan than it has to pay in interest on the deposit.

Heritage Bank’s English said physical branches continue to serve the bank well.

“I think it’s having a balance today of a local presence in the form of a branch retail network, but also investing dollars to continue to advance technological solutions for our customers,” he said.

Merrywell echoed that.

“While online and electronic banking are incredibly important and convenient, the ability to meet your banker and develop the face-to-face relationship is still a cornerstone of good banking,” he said.

Bank of America, which in January reported becoming the first financial services company to be both mobile app- and online banking-certified by J.D. Power for providing “an outstanding customer experience,” also has a big branch network in Washington, with 165 offices statewide. In each market, it says it strives to provide tailored solutions to fit customers’ needs, adding, “It’s how we make this large company personal and how we help our customers, clients, and communities thrive.”

Lakewood-based Sound Banking Co., with one branch in Lakewood, ranks as the smallest Washington-based bank in the Puget Sound region and second-smallest west of the Cascades (behind Longview-based Twin City Bank), with 0.03 percent of the state’s deposit share, or $47.9 million on June 30.

Ben Noble, president and CEO of Sound Banking, which is in its 30th year of business in Lakewood, doesn’t pay much attention to the deposit share reports as a one-branch “microbank.”

Sound Banking doesn’t get clients from marketing, but from word of mouth and relationships that come from a small environment, Noble said.

Noble’s bigger concern is what lies behind the market share reports: banks that are consolidating deposit market share through acquisition of smaller banks.

“How does that impact people who could have deposit relationships with smaller community banks, (which) might be apt to lend to them under different circumstances than maybe a big bank that has a box you have to fit in?” he asked. “I am concerned about that.”