After taking devastating losses in the stock market for the last two years - particularly in the last two months - investors are becoming savers.
Locally, bankers say there has been a large influx of money into savings and other short-term deposits - $465 million at Fifth Third Bank (Northwest Ohio) alone. And Huntington National Bank had a 56 percent surge in money-market account balances in the last six months in northern Ohio, an officer said.
“Investors are feeling whipsawed by the market,” said James Rohrs, president of Defiance-based First Federal Bank of the Midwest.
“Some older customers are saying they can't wait for long-term [market results] anymore and want to lock in a rate,” even if it's a small one. “People are taking money out of the market and just parking it.”
His bank, which has branches in 10 northwest Ohio communities, had a 20 percent increase in savings deposits and a 15 percent gain in money-market deposits in the first half of 2002, he said.
Nationally, savings accounts have ballooned by more than $200 billion this year, typically in money-market accounts paying 2 to 3 percent and passbook savings accounts paying just 1 percent and often less.
In one six-week period, investors took nearly $50 billion out of stock mutual funds. The Federal Reserve reported that savings accounts of all types totaled more than $2.5 trillion at midyear, up more than 20 percent from a year earlier.
Barb Berebitsky, community president for Huntington in the Toledo region, said, “Billions of dollars are leaving stock funds, and the money has to go somewhere.”
Much of her bank's gain was from its special offers, such as a 3 percent, no-minimum money-market account, she said.
Fifth Third's short-term deposits for northwest Ohio - including checking, savings, and sweep accounts - grew from $1.7 billion at the end of last year to just over $2 billion at the end of the first quarter and to $2.2 billion at the end of the first half, said John Szuch, chairman.
The influx is good for banks, he said. “You fund your loans and investments with it,” he explained. “For us it's very positive [but] we're bringing in a lot more than we need to fund our loan growth. We're flush with deposits.”
The surplus cash means banks have to put some of it in low-yielding but safe government securities, he pointed out.
Sharon Speyer, president of Sky Bank-Mid Am Region, looks on the additional savings accounts as a marketing opportunity. “These deposits provide us with an opportunity to cross-sell other products [such as] mortgages,” she said.
First Federal's Mr. Rohrs said, “This puts more pressure on us to get it loaned out. This is a great time to borrow money. Money is very, very available.”
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