Bank deposits reflect the surge of Federal Money into our local economy

Bank deposits are often seen as an indication of the health of the local economy. With the local economy shut down for most of the last two years, one might expect to see deposits falling off. One would be wrong.

Deposits for our local banks grew 21.5% in 2020 over 2019. The increase was just over $3.3 billion for all of the bank branches in our region. Deposit growth for individual institutions varied from a low of 8.3% to a high of 51.1%. Only Key Bank’s lone Wenatchee branch showed a decline in total deposits over 2019.

Discussion with local bankers drew a consensus that the increase was entirely caused by the Federal PPP loan program. Michael Machado of Peoples Bank in East Wenatchee confirmed that their bank had processed $100 million in PPP loans in 2020. That number is not reflected in their local deposit growth because the PPP loans were processed through all of the Peoples Banks not just the Wenatchee branch bank. People’s Bank Wenatchee branch deposits were slightly ahead of the region overall up 21.7%.

The impact of the PPP loans is not fully reflected in the local deposits. The best indication of the impact on Banks serving our area is to look at the changes in their loan portfolios as reported by the FDIC website. We compiled a couple charts for all of the banks serving our subscription area. Those charts include the banks major loan categories and what percentage those categories make up of the whole. The five categories are; Real Estate Loans, Commercial Loans, Individual Loans, Agriculture Loans, and Other Loans and Leases.

The loan portfolio analysis provided on the FDIC website under the banks Uniform Bank Financial Report does not break the numbers down by branch. It is also unclear on the larger National Banks which region includes our local branches. As a result, we did not include JP Morgan Chase, Key Bank, U.S. Bank or Wells Fargo in this analysis.

Examination of where the growth in deposits was invested, reveal Commercial Loans were the outstanding winner here. This is a clear reflection of the PPP loan program. Peoples Bank Commercial loans grew $160 million or 176.9% to 14.1% of their loan portfolio. Cashmere Valley Bank, our primarily local community bank, more than doubled their Commercial Loan portfolio to $126 million or 13.3% of their total loan portfolio.

Most bankers we asked expect 99% of the PPP loans will be forgiven. This means the businesses that took out those loans will not have to pay them back.

Real Estate Loan position varied across the banks. Although all of the banks we talked to reported their home loan and construction loan departments were swamped. With interest rates the lowest in half a century, people were refinancing. They also reported that the one part of the economy that was doing well was construction despite rising costs for lumber and building materials.

We also looked at each banks’ income categories. That chart shows Income from loans and leases, Income from investments, and net income overall. We also included the total dividends the bank paid to shareholders for 2020 and 2019.

We were unable to gather much of the data on the large national banks as it is not always clear which subdivision includes banking in our specific area. Those banks include JP Morgan Chase, U.S. Bank, Key Bank, and Wells Fargo Bank.

At this time, it appears Wells Fargo is reducing its investment in our area as they have closed their branches in Leavenworth and Brewster.

Through the Pandemic, all of our local banks have shown positive net income except for Umpqua Bank. Umpqua bank reported a net loss of $1.5 billion in 2020. Repeated phone calls to the corporate headquarters were unsuccessful in getting a detailed response. Discussions with stock brokers produced some financial reports that indicate the company is going through a reorganization. A January report says the loss is attributable to a $1.8 billion reduction in Goodwill. Last fall the company sold their wealth management division but we were unable to confirm if the sale created the write down in that divisions value. The Spokane Teachers Credit Union received regulatory approval to acquire 4 Umpqua bank branches in Medical Lake, Ritzville, Coulee City and Othello. It has been reported that Umpqua plans to shutter 30 to 50 branches over the next two years. We were unable to confirm this with Umpqua officials. Umpqua officials told us every branch has a direct line to the c.e.o. of the company, but when we attempted to get a local branch manager to dial that number and request an interview,  the local branch manager declined.

While the rest of our banks reported a profit for 2020 many were down from 2019. Declines in revenue did not always follow with declines in dividends, but dividend payments generally follow after the books for the year are closed.

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