Deposits in Colorado Springs-area financial institutions declined in the 12 months ending June 30 by the biggest percentage in at least 30 years, a sign that consumers are spending more and saving less amid persistent high prices, officials said.

The 5.4% drop in deposits is the largest in data available from the Federal Deposit Insurance Corp. and the National Credit Union Administration starting in 1994 and nearly triple the 1.8% decline in the 12 months ending on June 30, 2011, the last such fall. The $18.1 billion in deposits in banks and credit unions in El Paso and Teller counties was down more than $1 billion from June 30, 2022, with 35 of the 48 institutions reporting fewer deposits than a year earlier.

“While the inflation rate is slowing, people are more focused on the prices they are paying — they are spending $200 at the grocery store instead of $120 a few years ago,” said Tatiana Bailey, executive director of Data-Driven Economic Strategies, a Colorado Springs economic research nonprofit. “They are depleting their checking account because even though wages have increased, they haven’t kept up with inflation, so real wages are down.”

The U.S. inflation rate for the 12 months ending June 30 was 3.1%, down from nearly 9% in the previous 12 months, according to the U.S. Bureau of Labor Statistics.

Still, higher prices have prompted many consumers — not just those with lower incomes — to use credit cards more often to meet everyday expenses. Those consumers then pay their higher credit cards bills from their checking accounts, leaving less money deposited in banks and credit unions.

Banks and credit unions had been flush with depositor cash during and after the COVID-19 pandemic as large government stimulus payments fueled double-digit percentage increases in area deposits in 2020 and 2021. Area deposit growth slowed last year to 5.6% as the pandemic waned and consumers nationwide boosted spending on everything from eating out, entertainment and travel to big-ticket items like vehicles and homes.

Declines in the past year also occurred state- and nationwide with deposits in Colorado banks falling 8.8% in the 12 months ending June 30 to $187.3 billion and deposits in the nation’s banks dropping 4.9% during the same period to $17.9 trillion. The declines hit a peak of $472 billion during the first quarter, the biggest quarterly drop in 39 years the FDIC has been collecting such data, in the wake of three major bank failures this year.

Much of the nationwide declines during the first quarter were in deposits above the $250,000 per account federal deposit insurance limit. Bailey said banks and credit unions across the nation also had to compete for funds with U.S. Treasury securities yielding more than 5% annually and money market mutual funds paying higher interest rates, Bailey said. Many banks chose not to match the higher rates available on government securities and mutual funds.

That made attracting deposits a challenge for Alpine Bank, which opened its first Colorado Springs branch Oct. 31 last year in the Wells Fargo Tower downtown and landed just $1.2 million in deposits as of June 30. Matthew Hanson, president of Alpine’s local operations, said the Glenwood Springs-based bank, the state’s fifth-largest based on deposits, wasn’t “out there buying deposits (with high rates). We want to earn (longer-term) customer relationships.”

Hanson said declines in deposits hasn’t had much of an impact on the ability of Alpine or most other banks to make loans. He said demand for loans, both locally and nationwide, has fallen sharply as lending rates have more than doubled during the past year.

Alpine’s “slow and steady” strategy has paid off in the past three months – deposits have grown fourfold to nearly $5 million as the bank has added consumers and small business customers ranging from retailers and restaurants to professionals and nonprofits, mostly from other banks, Hanson said. Overall, the bank’s deposits fell in the past year as some customers sought higher rates elsewhere and businesses started spending federal pandemic aid they received.

Alpine wants to grow in the Colorado Springs area, likely adding another branch or two in the next few years, similar to its earlier expansion in the Denver area and northern Front Range, Hanson said. The bank opened its first branch downtown because “we love the activity and energy downtown. We see tremendous consumer and business opportunities downtown in the next five to 10 years,” but will need other branches to reach consumers elsewhere, he said.