FDIC: Deposit growth slows for Hampton Roads banks

Bank deposits in Hampton Roads grew at their slowest pace in more than a decade in the year ending June 30, the Federal Deposit Insurance Corp. said in its latest survey of deposit market share.

Deposits, the raw material for most bank loans to individuals and businesses, grew 1 percent during the 12 months through June, according to the FDIC survey of deposits in Hampton Roads.

That was down sharply from annual increases of 5.7 percent in 2007 and 8.8 percent in 2006. The report, released Oct. 8, also ranked financial institutions by their share of deposits in the market.

The anemic growth reflected the slower pace of economic activity in the region, bankers in Hampton Roads said. Some businesses in the region, including builders, weren't drawing on their bank lines of credit, so funds weren't flowing into bank accounts, said Brad Schwartz, executive vice president and chief financial officer at Monarch Bank in Chesapeake.

However, the competition for deposits eased during the past week as nervous investors shifted money from the stock market to bank certificates of deposit and money-market accounts, Schwartz said.

Fears among some Hampton Roads depositors that their bank accounts might not be fully insured prompted some consumers, businesses and nonprofit organizations to spread their funds among a handful of institutions, bankers said. These transfers moderated earlier this month, bankers said, after the FDIC temporarily raised the ceiling for its insurance coverage to $250,000 per account. Retirement accounts were already insured for $250,000.

As part of its plan to foster greater confidence in banks and spur lending, the FDIC on Tuesday said it will provide full insurance coverage on deposits in noninterest checking accounts, the kind that businesses typically use. The unlimited coverage of these accounts will expire at the end of 2009.

In Hampton Roads, the competition for deposits had intensified in recent months as financially ailing Wachovia Bank stepped up the rates it offered for short-term CDs.

Wachovia, with slightly more than $4 billion of deposits in Hampton Roads, headed the FDIC's list of banks by share of deposits in the region with 21.5 percent. The Charlotte, N.C.-based bank has been at the top of the annual ranking for Hampton Roads since 2002.

The rankings in the latest FDIC survey of Hampton Roads' bank deposits didn't change significantly from the 2007 survey. The top five banks on the list continued to hold more than 73 percent of the region's deposits.

SunTrust ranked No. 2 behind Wachovia in amount of deposits, and Branch Banking & Trust Co. was No. 3. Bank of America was fourth, followed by TowneBank.

The latest survey was compiled before the FDIC negotiated a hurried takeover of Wachovia Bank by New York-based Citigroup. Concerned about Wachovia Bank's mounting liquidity problems and the threat they posed to the deposit-insurance fund, the FDIC agreed to take over some of Wachovia's troubled assets after the merger if needed.

Within days of the FDIC agreement with Citigroup, San Francisco-based Wells Fargo & Co. offered to buy all of Wachovia Corp., including its brokerage firm and asset management subsidiary. Wachovia accepted the Wells Fargo offer, which was approved last weekend by federal regulators. It still must be approved by Wachovia's shareholders.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com