On Wednesday, October 8, ABC News reported that in the last two weeks of September, Americans placed $185 billion in savings and checking accounts. During a normal two week period, that number is $5 billion. Turmoil in the financial world can churn up deposits as consumers transfer funds to minimize losses or liquidate investments. Other influencing factors include mergers and failures in the financial industry. These shake-ups can have lasting regional consequences.
JPMorgan Chase said the acquisition of Washington Mutual will give it 5,400 branches in 23 states. Reports indicate that less than 10 percent of the branches will be closed, but specific locations are still in flux.
Wells Fargo, after a rumble with Citigroup, will be purchasing Wachovia for $15.1 billion. The combination will create the largest branch footprint in the U.S. The new Wells Fargo will have 6,675 “retail banking stores” according to company filings. The two companies have few overlapping markets, namely California and Texas.
A brief analysis of the Southern California market (Counties of Los Angeles, Orange and San Diego) indicates opportunities for credit unions. On June 30, Wachovia had 11 offices in San Diego County, 36 offices in Orange County and 33 offices in Los Angeles County. IndyMac Bank still maintains their market share, but many customers have found other financial institutions for their deposits.
Selected Wachovia and Wells Fargo branches in Southern California
Source: Callahan & Associates, FDIC Summary of Deposits
Even when a bank does not fail, the loss in deposits can happen quickly given current market conditions. Wachovia’s bank deposits are estimated to have fallen by $7.4 billion between Friday morning prior to Citigroup’s offer for the bank and Monday afternoon when Wells Fargo announced their bid for the company. After market changes, the 109 branches held by Wachovia and IndyMac may be closed. Credit unions with nearby branches can benefit from those by marketing their convenience, safety and stability, and the cooperative principles.