JACKSONVILLE, Fla. — Peter Hampton of Ortega used to deposit his money with a large bank, but started to have second thoughts when it emerged as a victim of the widening Wall Street meltdown.
He said he didn’t want to name the bank, but news of the spreading crisis caused by failed loans had the 40-year-old customer service manager of St. Johns Power Sports in Palatka and his wife, Joye, feeling increasingly insecure about their money, he said.
"We spoke to each other, watching the news, and said, “Maybe we should do something else. We need to get our money somewhere we trust; where we know the right decisions are being made to keep the bank in the best situation as possible,’" he said.
They moved their funds to First Guaranty Bank, a small, Jacksonville community bank dating back to 1947. They did that because they agreed First Guaranty is fiscally conservative, he said.
"I never thought that was a big plus, but now I’ve seen the results of what happens when banks go crazy, lending money to everyone on every street corner," he said.
First Guaranty CEO Jay Fant said the bank’s deposits have increased over the last month.
"It’s not a sea change, but it’s a noticeable uptick," Fant said. "I believe the independent banks in town are experiencing the same."
Terry West, president and CEO of VyStar Credit Union, said people’s reactions to recent business headlines seem to be driving depositors to his financial institution, too.
"We’ve had people coming in who have opened accounts, some have been from Wachovia, some from other institutions. As a credit union, we’re conservative; our depositors own us," West said.
Chip Townsend, president, CEO and chairman of Nassau County’s First Coast Community Bank, said he’s seen a marked increase in deposits. In a good month, the bank may see deposits increase by 1.25 percent, but in September, the bank’s deposits rose 2.3 percent, he said.
"I think that what people are doing is they’re making a flight to what they perceive to be the highest quality and the safest institutions," Townsend said.
One of the questions new customers most frequently ask is about deposit insurance, West said. Credit union deposits are insured by the National Credit Union Administration, and the amounts insured are equal to that of Federal Deposit Insurance Corp.
The Emergency Economic Stabilization Act of 2008 raised coverage from $100,000 to $250,000 on Oct. 3. The NCUA coverage increase is identical, West said.
The temporary insurance coverage increase expires Dec. 31, 2009.
New depositors also want to know how closely connected their new bank is to risky loans and how the bank otherwise is doing financially, he said.
Fant said the quiet relocation of capital isn’t anything new and happens when there’s bad financial news.
"There certainly has been well-publicized mergers or forced marriage in the media that creates a response with people," he said. "Ironically, their money is plenty safe where they have it, but it’s an emotional reaction to go with their hearts and move their money."
The most troubling thing the bank managers said they’ve heard has come from a handful of customers who want to withdraw all their money and squirrel it away themselves. "We ask them to think twice about that," Townsend said. "It is as safe as the full faith and credit as the United States government. There are about 8,400 banks in the country. The FDIC is talking about a problem list of fewer than 120 banks. Most are well-capitalized and well run. I believe we are surrounded by survivors."
But for customers like Hampton, seeing the veneer of invincibility disappear from financial giants was unsettling.
"I’d never thought about a bank going out of business," he said.
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