Where do you bank?

Banking variety remains alive and well in Ulster County. What most local people don’t seem to realize is that the same can’t be said of most places in this country. In the nation as a whole, the commercial banks have been continuing to strengthen their domination of the banking marketplace. In many communities they have already in brick-and-mortar terms become the only financial game in town. There are few real choices.

According to the most recent federal data, the deposits of all the commercial banks in the nation amounted to approximately thirteen times the deposits of all the local banks (all but one a savings bank). While the amount of deposits in the savings banks had been stagnant in recent years, those at the commercial banks had increased by more than half the total deposits of all the savings banks in that single year alone.    

Ulster County is marching to a different drummer. The most recent federal data shows the national banks growing more slowly in deposits in Ulster County than the local banks. If present trends continue, total Ulster County deposits in local banking institutions will exceed those in the county’s non-local banks in three or four years. And Ulster County continues to be one of the strongholds of credit unions, another important part of the banking world.

The difference in deposit patterns among types of banks this past year has been dramatic. Deposits in the seven largest commercial banks operating in Ulster County (Bank of America, M&T, Key, JP Morgan Chase, Wells Fargo, Citizens and TD) grew less than two million dollars in the year ending June 30. In contrast, deposits in the eight local banks operating in the county (Ulster Savings, Rondout Savings, Sawyer Savings, Wallkill Valley S&L, Catskill Hudson, Bank of Greene County, Rhinebeck and Walden Savings) increased by more than $67 million. 

We classify Catskill Hudson with the savings banks as a community bank because it has been locally controlled. The direction of the data wouldn’t materially change if it were classified otherwise.  

Four other entities which were neither primarily local nor among the largest national banks (Sterling, Salisbury, Community and Trustco) remained relatively small players, losing about seven million in Ulster County deposits over the year.

That’s been a continuation of the same banking pattern over the last several years. The seven national banks had $1.655 billion in Ulster County deposits as of June 30 of this year, while the eight local banks had deposits of $1.505 billion. The four middle-size players had a total of $115 million in Ulster County deposits.

The local banking picture is enlivened in Ulster County by the presence of strong credit unions, their role particularly accentuated by the presence in Ulster County of two ex-IBM credit unions, the Hudson Valley Credit Union and the Mid-Hudson Valley FCU. Credit unions are not-for-profit institutions that report to a separate federal regulator (NCUA) which doesn’t publish deposit amounts (they call them shares) by geographic location. 

A recent trend, according to an October 2019 Forbes Magazine, involves credit unions buying banks. The 434 credit unions in the nation with more than $700 million in assets look to buy banks with assets less than $500 million. Real estate and construction loans can bring higher returns than lower-yielding consumer lending such as mortgages and auto loans, a lawyer involved in bank acquisitions explained. Combining the commercial lending expertise of banks with credit-union analysis skills can lead to faster growth.

A conservative estimate would be that the value of the shares held in credit unions by Ulster County residents exceeds a billion dollars. Adding a billion-dollar estimate in value of credit-union shares to bank deposits would bring total Ulster County holdings to $4.3 billion.

That’s both a lot of money and very little money. The 211 banking institutions in New York State (not including credit unions) held $1.754 trillion dollars in deposits as of June 30. If Ulster County, with close to one percent of the state’s population, had one percent of the bank deposits, it would have $17.5 billion in deposits and not the $3.3 billion (excluding the credit unions) it actually has. That differential is caused primarily by the consequences of Wall Street being the banking capital of the nation — as well as a major world financial center. In June of this year New York County (Manhattan) alone reported a tidy $1.163 trillion in deposits in its bank coffers, leaving a mere $591 billion from the state total to be divided among the less financially well-endowed counties, including Ulster. Manhattan deposit coffers had increased $32 billion over the previous year. 

Supporters of commercial and of community banks each have their stories to tell, and each often touts the same strengths. The difference in tone of message is considerable, however.

Commercial banks usually emphasize products and services designed for corporations, institutions and sometimes governments. They offer not only deposit products but also merchant services, commercial loans and other corporate-oriented products. According to one Motley Fool telling, they claim they use technology to deliver a better customer experience. Customers, they say, want easy-to-buy, easy-to-use services just like they get from their personal accounts.

Community banks, explains the Independent Community Bankers Association website, “are an integral part of Main Street; they reinvest local dollars back into the community and help create local jobs.” Their relationship banking philosophy is ingrained in the way they conduct business. “Local reinvestment helps small businesses grow and helps families finance major purchases and build financial security.” They are of course “also nimble in using new technology platforms, supporting emerging methods of payments, and advocating tougher security standards to protect small-business owners and customers from hackers and other criminals.”

Ulster County residents and businesses still have choice. With seven large national commercial banks, eight local banks, at least five credit unions and a few other players with a footprint in the Ulster County financial marketplace, the range of banking choices along with non-banking institutions provides sufficient diversity for most banking-related needs. Moreover, it appears that plenitude of choice is at least not in the short term likely to decrease. 

Banking has to do with the efficient allocation of capital. It doesn’t lay claim to address the injustices of a manifestly unequal social system. By creating credit, banks can raise aggregate demand, leading to more economic activity.

Some banks, driven by their sense of their mission to participate in efforts to promote economic opportunity in their communities, do considerably more than the minimum required of them. They participate together with partners in more risky community lending for altruistic reasons or because of financial inducements, self-interest (protecting their other investments), or payment for services.

When it comes to innovative forms of financial participation, Kingston-based Rupco has been an active partner for Ulster County banks and credit unions. Rupco’s leadership has been key to the utilization of government-backed tools for community development. It and Hudson River Housing in Poughkeepsie have been the two Hudson Valley members of Neighborworks America, a pioneer in national community development. The case should be made that it is the diversity of bank missions in the county that has enabled Rupco to find banking partners for the innovative community-building for which it has become widely known.