The fast-changing banking industry is fighting for your dollars — and facing tough competition from increasingly confident credit unions.
The banking industry’s internal battles remain intense as national, regional, and a single remaining locally based bank posture to secure a solid market share in anticipation of increased demand for loans and other services. National banks, although tarnished by their role in the finance sector’s dubious contributions to the nation’s economic crisis, continue to appeal to businesses and consumers with their national reach and wide range of services. Regional banks emphasize personalized, friendly service and deeper ties to local communities.
Credit unions have been a quiet outlier, gradually attracting customers drawn to friendly service and low fees, as well as their independent status as customer-owned and managed institutions with historic ties to a community.
With qualified borrowers for business and personal loans still in short supply, much of the next wave of bank growth will come from financial institutions fighting to win a larger share of the existing market, said Jeff Rulis, senior vice president and senior research analyst at the investment research firm D.A. Davidson’s Lake Oswego, Ore. office.
“We’ve gotten back to the point where health has returned to industry on the whole,” Rulis said. “Now we’re looking at banks that are much more healthy than were. They can start to turn their eyes to growth.”
Some elements of the industry’s transformation are unfolding in Clark County this summer. Next month, Sterling Bank will roll out its rebranding of the former First Independent Bank’s branches and services, completing a takeover of what had been one of the nation’s last family-owned banks. Sterling aims to pitch itself as a strong regional alternative to national banks.
Less visibly, Olympia-based Heritage Bank is setting the groundwork for expansion in Southwest Washington. It expects to announce within 90 days plans for a second branch in Clark County, and Heritage is preparing to open other branches as well as a regional headquarters in Vancouver, said Brian Vance, president and chief executive officer.
Vance expects a further shakeout of an oversaturated banking sector nationally and locally. “We believe consolidation will happen over the next few years,” he said. “We have the ability and desire to expand, and we have the capital to do it.”
Statewide, credit unions held about 20 percent of deposits in 2011, having steadily gained market share since 2009, according to the state Department of Financial Institutions. Vancouver-based Columbia Credit Union was the 10th largest in Washington at the end of last year, out of 110 credit unions, as measured by assets. IQ Credit Union, also based in Vancouver, was the state’s 18th largest.
Columbia leaders say their credit union focuses on great service to members, support for sustainability in their programs and operations, and financial literacy education as values to build their business. “We haven’t approached the marketing to put competitors in a poor light,” said president and CEO Steve Kenny, a former banking executive. “Sometimes they do a good job of that themselves.”
As most banks finally enjoy renewed health, Vancouver-based Riverview has emerged as a latecomer to the industry’s down cycle. Riverview has reported large losses for its last two fiscal cycles and has seen large drops in its stock value. Its re
cent struggles have created some worries: in April, an analyst for the investment advisory firm Wunderlich Securities downgraded Riverview’s stock to “sell.” But Riverview officials say the bank is going through the same financial adjustments that many banks made much earlier in the economic downturn and that it remains fundamentally sound.
Meanwhile, Sterling’s takeover of First Independent won’t be without pain to those working in the local banking industry: Sterling expects to announce layoffs of at least 50 local employees as it completes its consolidation of service jobs to its Spokane headquarters.
Marty Dickinson, Sterling’s marketing and communications executive vice president, said that announcement should come within two weeks.
Ready for next cycle
With Clark County’s economy slow to recover from the Great Recession, the heated competition in the finance sector might come as a surprise to some. Indeed, many financial institutions are awash in cash, and have ended up paying interest on money that not enough people want to borrow.
But industry leaders and analysts say lenders are positioning themselves to survive the next cyclical shakeout by attracting customers with a wide range of services from savings accounts to home and auto loans, to management of investments and retirement accounts.
Vance, of Heritage Bank, is among those who are looking beyond the local stagnant economy to see a brighter future in Clark County that should be good to financial institutions. Heritage’s board of directors recently toured the county, and board members were uniformly impressed with the area’s positive economic attributes including its high-technology industries, growing health care and financial services sectors, and a strong Port of Vancouver, he said.
“We believe that once Clark County is out of its rough patch, it will come out very strong,” he said.