Regulatory guidance clarifying how banks should record uninsured deposits led to another round of revisions to previously reported totals.
After the regional bank failures in March put a bright spotlight on uninsured deposits, institutions took a closer look at their calculations, which led to a surge in banks downwardly revising their fourth-quarter 2022 and first-quarter 2023 uninsured deposits in regulatory filings. But recent Federal Deposit Insurance Corp. guidance clarifying that banks must include intercompany and collateralized deposits in their totals led to another round of revisions.
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Since that guidance was issued July 24, 46 banks have restated their fourth-quarter 2022 uninsured deposit totals and 65 banks have restated their first-quarter 2023 uninsured deposit call report data, according to an S&P Global Market Intelligence analysis. Most of those restatements are upward revisions as many banks re-added intercompany and collateralized deposits to their totals.
Now, 117 companies have restated their fourth-quarter 2022 uninsured call report data for a net decline of $281.39 billion since the original filings. For the first quarter, 98 banks have restated for a net decline of $79.58 billion.
Restatements
Columbia Bank posted the largest restatement since July 24 for both the fourth quarter of 2022 and the first quarter. Its fourth-quarter 2022 uninsured deposits more than doubled to $6.43 billion from $2.63 billion.
First Bank Chicago also nearly doubled its uninsured deposits from its original filing for the fourth quarter of 2022, restating to $614.8 million from $331.4 million.
HarborOne Bank, Quad City Bank and Trust Co., Oak Valley Community Bank, Chemung Canal Trust Co., HomeTrust Bank, Stockman Bank of Montana, First Federal Bank, Univest Bank and Trust Co. and FineMark National Bank & Trust each told Market Intelligence their restatements were related to the FDIC's guidance.
Many banks have restated more than once. Among the 46 banks that have restated their fourth-quarter 2022 total since the FDIC guidance, 22 of those have restated at least twice.
One of those banks, Provident Bank, initially reported having more than $5 billion in uninsured deposits, but fell below that after restating in June due to refining its calculations. But Provident once again found itself above $5 billion in uninsured deposits after it had to restate again following the FDIC's guidance.
The bank reported $5.29 billion of uninsured deposits for the fourth quarter of 2022 on its latest restatement, up from $4.89 billion in its previous filing. Banks will likely push back on the FDIC's guidance that they must include intercompany and collateralized deposits, Provident Financial Services Inc. CFO Thomas Lyons said in an interview.
"If you're trying to assess the stability of the deposit base, to consider those uninsured and then assign them a level of instability is inappropriate," Lyons said.
But not all banks restated after the guidance in order to add in intercompany and collateralized deposits.
National Exchange Bank and Trust, Pacific National Bank, Cadence Bank, Centier Bank, Farmers & Merchants Bank of Long Beach and Timberland Bank restated for different reasons, mainly as a result of refining their calculations, the banks said in statements to Market Intelligence.
While many banks are restating to add those deposits in after the FDIC's guidance, not all are.
Bank of America Corp. reduced its uninsured deposit total on its fourth-quarter 2022 call report by $125.34 billion after having "identified certain internal or intra-bank accounts that shouldn't have been reported," spokesperson William Halldin previously told Market Intelligence. After the FDIC's guidance, the company does not plan to restate again to add those deposits back into its uninsured deposit total, Halldin said.
In the guidance, the FDIC called on institutions that "incorrectly reduced" their uninsured deposit levels to amend their call reports. Banks can submit up to three years of revisions or more, "if appropriate," according to the agency.
Most banks will likely restate voluntarily and correctly report that data going forward, but if not, regulators will direct banks to fix problems if they find them, said Rick Childs, a partner at Crowe LLP. In particular, the FDIC will want to ensure fourth-quarter 2022 totals are correct so that special assessment calculations are accurate, Childs said.
"The biggest issue, in addition to not filing your call report right, is that your assessments may be wrong, and that would be something that the FDIC is very interested in," Childs said in an interview. "So they'll direct them to correct the call report if for no other reason than just to make sure the assessments are right."
The special assessment was likely the impetus for the guidance, said Matthew Bisanz, a partner in Mayer Brown's Financial Services Regulatory and Enforcement practice.
"This is the first time this number has real significance because it's the driving factor for the special assessment to replenish the Deposit Insurance Fund," Bisanz said. "It didn't really matter before. It was a number. You're supposed to get numbers right, etc., but when it doesn't have any consequences, it's a little less important. But now that there are consequences to it, that's probably why the FDIC has focused so much on it."
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Potential for penalties
Lawyers anticipate banks will face consequences if they do not correct their uninsured deposit call report data.
Banks potentially could receive a notice of matters requiring attention from regulators if they do not correctly report uninsured deposit totals, Childs said. Banks could also face consent orders and civil money penalties as a result of not complying with the guidance, according to John Gorman, partner at Luse Gorman PC, who represents financial institutions on M&A, regulation and other topics.
Enforcement actions would also come, along with no more expedited processing for applications and potentially being charged higher assessment rates, Gorman said.
"You really want to avoid that if you can," Gorman added.
Banks will likely continue to report uninsured deposit totals that exclude intercompany and collateralized deposits in their investor presentation in order to "mitigate the market perception around their uninsured deposits, which is fine," Childs said. "The FDIC is not really saying anything about that because it's not really their regulatory purview."