by Frank Pizzoli

A $1 billion increase in Pennsylvania’s rural bank deposits may explain why grandma’s mattress looks fatter these days. For 1996, rural state residents and businesses had over $25.7 billion in bank savings, making the average rural account about $10,100 per person. Meanwhile, urban bank deposits declined by $11.8 billion, leaving the average urban account at about $13,000 per person. The state average is $12,421, according to the Federal Deposit Insurance Corporation.

The increase in rural bank deposits and the decline in urban deposits reflect a trend; banks are opening in rural areas and closing in urban quarters. Between 1993 and 1996, 18 new banks opened in rural counties, with all but four saw an increase in bank deposits. One possible reason explaining the banking community’s renewed interest in small towns is simple – customer loyalty.

For example, on a per capita basis, there is a $5,500 gap in the total incomes between rural and urban residents. This gap is partially caused by the difference in non-earned incomes, or incomes which come from activities other than working. Urban residents, on average, capture about $1,500 more from dividends and interest. With lower bank interest rates, they invest in stocks and bonds. Rural residents, on average, have less income and tend to invest in community banks.

A MODE Heads Up - watch Commerce Bank in the coming months.

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