That’s where the money is

Newly released bank data for Ulster County shows that the trend toward larger percentage gains in deposits for local and small regional banks than for the national banks is continuing. Federal statistics show that deposits at the seven most significant community banks in Ulster County increased by $80 million for the past year as of June 30, while local deposits at the branches of seven national banks with a presence in the county increased by only six million dollars year-to-year. Total bank deposits in Ulster County were $3.275 billion in mid-2019. 

The migration of share-of-market from the national banks to the community banks of Ulster County has been striking. Five years ago the national banks held twice as much in Ulster County deposits as the community banks did. The market-share margin between the two has since markedly narrowed. By the most current compilation, the national banks have 50.5 percent of all deposits, the community banks 43.7 percent, and a handful of regional banks the remaining 6.8 percent. If present trends continue, deposits in Ulster County community banks would catch up with those in the local branches of the national banks in a few years.

As we’ll see this pattern is markedly different from that in the nation as a whole.  

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Credit unions also bring more diversity to the Hudson Valley financing marketplace. The federal credit-union regulator does not require a county breakdown of funds, but regional data shows credit unions to be a powerful force in mid-Hudson consumer financing. Five of them (not including the US Alliance credit union) are influential in Ulster County — the giant Hudson Valley Credit Union headquartered in Poughkeepsie, the Mid-Hudson Valley FCU headquartered in the Town of Ulster, Hudson Heritage based in Middletown, TEG in Poughkeespie, and Ulster Federal Credit Union in Kingston. Among them, they boast about seven billion dollars in regional assets. 

Despite continuing innovation in the financial world — think fintech, payday lending, microloans, ATMs, cooperatives, blockchain, shadow banking, and venture and vulture capital — the availability of diverse banking services remains a cornerstone of the regional economy. For the Hudson Valley, branch banking is an important part of the local civic arboretum in the $19-trillion U.S. banking industry. 

The variety of the remaining local industry players in the Hudson Valley offers consumers more banking choices than they enjoy in many non-large-city places. The Hudson Valley has been largely spared the phenomenon that many other regions have experienced, of deposit market shares moving away from community banks. The community banking model is alive and functioning in the region.

Community banks have a long history of establishing and maintaining local relationships over periods of time. They offer customers local knowledge and relationship-based banking. They are often more intimately invested in the communities they serve. According to a paper by R.A. Cole recently written for the federal Small Business Administration, small-business lending during the most recent recession helped slow the decline of smaller banks. The banking industry, however, continued to consolidate into ever-larger units nationally. 

Bank deposits reported to the federal regulators by geographical location are not always a full indicator of local banking activity. Wells Fargo Bank, for instance, recorded deposits of $830 million in Ulster County in 2014 and only $160 million in 2019. But that didn’t mean the bank’s financial performance was shaky. Its deposits increased nationally from just over a trillion dollars in 2014 to $1.3 trillion this year. Banks, like squirrels moving their food caches, sometimes shift around their assets for reasons that have little or nothing to do with their activities in local markets. 

The financial role of banking needs no dramatization. Bank assets constitute 56 percent of the American economy. According to one estimate, that’s enough to buy every person in the world a 13-inch Macbook Pro, with money left over for accessories. Just the top 15 banks have $14 trillion in assets. As an industry, banking faces two ways, toward increasing capital accumulation and toward community service.

Which of the 19 banking institutions of Ulster County have shown steady percentage growth in deposits in the past decade? Looking at the federal statistics for 2009, 2014, 2016, 2018 and 2019, we found seven banks that qualified. One was the behemoth J.P. Morgan Chase, which maintains branch offices in Kingston Plaza and on Plattekill Avenue in New Paltz. The other six were community-based savings institutions: Ulster Savings, Rondout Savings, Sawyer Savings, Wallkill Valley S&L, Rhinebeck Savings and Walden Savings. 

A new entrant to the Ulster County banking scene, The Bank of Greene County, gives promise of doing the same. The Bank of Greene County, in common with Rhinebeck Savings and the Catskill Hudson Bank, has its headquarters and main banking base outside Ulster County but finds Ulster a promising marketplace in which to have a presence. 

About 73 percent of the $1.1 billion in deposits of The Bank of Greene County are in its home county. Almost 90 percent of the Rhinebeck Bank’s $742 million in deposits are in its Dutchess County branches and 57 percent of Catskill Hudson Bank’s deposits of $427 million are in Sullivan County.

Ulster Savings Bank was familiar with that playbook a generation ago, establishing substantial presence in Dutchess and Orange counties. Today, though, Ulster County still contributes 81 percent of the  Kingston-based bank’s deposits.

Banks are not all the same, especially community banks. They differ in their history, their relationship to their communities and their customers, their leadership, their financial condition, their strategic imperatives. For most people, having a variety of banking choices makes life easier.

To a potential borrower — and that includes many of us — that diversity is welcome. As some schools teach in Economics 101, money is more than a means of payment. It’s a lubricant that facilitates exchange. Everyone accepts money as the medium of exchange. It makes life easier, simplifying the need to match supply and demand.

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