The nation's financial crisis appears far from over, but it has already remade the Sacramento region's banking landscape.
Local market leaders Wells Fargo and Bank of America have grown even bigger. Wachovia, the No. 4 player in the region just two weeks ago, has collapsed, and appears likely to be acquired by Wells Fargo. U.S. Bank, the third-largest in the region, has boosted its local market share 40 percent in the last year. And $2 trillion giant JPMorgan Chase has lumbered into town by buying Washington Mutual.
Four national banks are now on track to control two-thirds of the region's deposits, and their ever-increasing size gives their corporate parents more power to cut costs, expand services and buy up competitors.
The shake-up puts new pressure on the region's smaller banks and credit unions, which, compared with the industry giants, generally have fewer branches, smaller budgets for advertising and online banking, and a narrower range of services.
But the upheaval on Wall Street has shaken consumers' faith in big financial institutions, and experts say smaller players have the chance to win new customers by capitalizing on their strengths: trust, face-to-face service and a connection to the community.
"There's a tremendous dislocation of customers," said Anat Bird, a former Wells Fargo executive and bank-industry consultant in Granite Bay. "I think community banks of all sizes will have a great opportunity to capture customers that are fleeing from the bigger guys."
Over the last two decades, consolidation has cut the nation's total number of banks roughly in half, to 8,500 today.
The same trend is clear in the four-county Sacramento region, according to a Bee analysis of data from the Federal Deposit Insurance Corp.
In the past five years, six locally owned banks have been acquired by larger banks based outside the region. During the same period, four new local banks opened, but they're substantially smaller than the ones that disappeared.
As a result, locally owned banks' share of the region's $30 billion in deposits has dropped substantially. Five years ago, local banks accounted for 23 percent of all bank branches and 14 percent of the region's deposits. Today, they operate 12 percent of area branches and hold 8.4 percent of deposits.
At the same time, though, the total number of banks with branches in the region has actually increased, from 40 to 51.
For the most part, that's because many community banks based outside the region – like Umpqua and PremierWest, both headquartered in Oregon – have expanded into the Sacramento area.
The FDIC figures don't include credit unions, which have a strong presence in the region, led by Golden 1, the largest credit union in the state.
At Folsom Lake Bank, which opened in early 2007 and has just one branch, Chief Financial Officer Jack Olson said deposits have been growing ahead of schedule.
"Customers are looking for safety," he said. "All the large institutions are having issues related to asset problems. We don't have any of that."
Minneapolis-based U.S. Bank, one of the smaller national banks with $128 billion in deposits across the country, has ramped up advertising and employee training that focus on delivering a message of strength and stability – as well as service – to customers.
"We're trying to promote ourselves as the little big bank," said Kent Stone, the bank's Sacramento-based executive vice president of consumer support services.
Lani Hayward, executive vice president of creative strategies at Portland, Ore.-based Umpqua Bank, which has about $6.5 billion in total deposits, said the credit crunch hasn't changed her bank's strategy much. The focus remains on offering the banking experience of a small community bank combined with some of the benefits of a larger bank, like higher lending limits, she said.
Regardless of a bank or credit union's size, deposit accounts are covered up to $250,000 by the federal government.
Small banks as a rule have avoided the home-mortgage troubles that sunk Wachovia and Washington Mutual. A few local banks, though, do have sizable past-due debts on their books from loans to real-estate developers.
Call The Bee's Jim Downing, (916) 321-1065.
