Savings Rate Bolsters Local Deposits
Worcester-based Commerce Bank & Trust Co. has been around for 55 years, but the bank had its best year for growth in 2009 during one of the worst recessions the bank has lived through.
“It’s unbelievable,” said President and CEO Brian Thompson. “I think it truly was a flight to safety.”
The personal savings rate in the country as a percentage of the average American’s income has increased almost four-fold in a year and a half, according to the Bureau of Economic Analysis.
And some local banks are feeling the benefit through increased deposits last calendar year.
Run To The Bank
A steep recession, fears of an uncertain stock market and increased protection from the Federal Deposit Insurance Corp. added up to increased deposits for some area banks.
Deposits at Commerce, which is based in Worcester, increased by 22 percent in 2009 compared to the year earlier. Normal year-over-year deposit growth is less than 10 percent.
“People were concerned, and some were afraid, about what was happening nationally,” Thompson said. “I think a lot of people brought their money home.”
The FDIC also increased the insurance amount from $100,000 to $250,000 per depositor in late 2008.
Mark O’Connell, president and CEO of Avidia Bank in Hudson, said the bank saw a 12 percent increase in deposits in 2009 compared to 2008. It was a three-fold increase over what he was expecting and the largest growth in eight years.
Consumers are spending less money and some of that money, O’Connell believes, is landing in savings accounts at banks.
“Obviously the growth in the deposits helps with our long-term goals of continuing to grow our loans,” he said.
Loan activity in 2009, however, was dominated by refinancing, not new borrowing, O’Connell said. He’s hoping more businesses will look to secure new loans in 2010.
O’Connell is not expecting deposits to increase as much this year as consumers become more confident in spending.
Robert Paulhus, president and CEO of Clinton Savings Bank, said he was expecting a dip in the bank’s deposits last year because of the economy. Instead, deposits inched up about 8 percent.
“We were certainly hoping for it, but what we ended up seeing is what we’ve seen around the country,” he said.
Paulhus said he doesn’t plan to make any changes because of the increase, and he too said he’s looking to increase lending in 2010.
Not all banks saw increased deposits last year, however. Natick-based Middlesex Savings Bank Chief Operating Officer Brian Lanigan said the bank saw average deposit growth in 2009. During the economic slowdown people were either trying to pay off debt or reallocate money to longer-term accounts, such as retirement funds that may have taken a hit from the stock market, Lanigan said.
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