The majority of US banks with assets between $100 billion and $1 trillion reporting earnings from Oct. 13 to Oct. 20 posted sequential declines in total deposits and net interest margin during the third quarter.

The same was true on a year-over-year basis, according to an S&P Global Market Intelligence analysis.

A mixed quarter for deposits

Five of the nine banks in the analysis reported quarter-over-quarter decreases in total deposits. Four of those banks also reported year-over-year decreases, along with Citizens Financial Group Inc., which reported a year-over-year decline and a quarterly deposit increase.

Truist Financial Corp. reported the largest quarterly decline at 1.5%, while Regions Financial Corp. reported the largest year-over-year decline at 6.8% despite a sequential decline of just 0.6%.

Both companies said they experienced "remixing" of deposits toward higher-yielding accounts during their earnings calls. Noninterest-bearing deposits decreased 3.9% at Truist and now represent 30% of its total deposits, compared to 31% in the second quarter, President and CEO William Rogers Jr. said during the company's third-quarter earnings call.

Similarly, "rate-seeking behavior" was the primary driver behind deposit declines at Regions, CFO David Turner Jr. said during the company's third-quarter earnings call.

"We expect deposits to be stable to modestly lower in the fourth quarter, and we expect continued remixing into interest-bearing categories," Turner said.

Bank net interest margins remain under pressure

After most banks in the group reported year-over-year net interest margin (NIM) increases during the second quarter, only two of the nine banks in the analysis, Regions and M&T Bank Corp., reported year-over-year increases in the third quarter. Huntington Bancshares Inc. and Truist reported NIM increases sequentially.

Regions reported the largest sequential decline of 27 basis points and KeyCorp reported the largest year-over-year decline at 73 bps.

"The decline is driven by deposit cost normalization, the start of the active period on $6 billion of incremental hedging, as well as a one-time leverage lease residual value adjustment," Regions' Turner said.

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EPS continues to weaken

Year-over-year earnings trends were mixed in the third quarter as four of the nine banks reported earnings increases quarter over quarter, four reported decreases and one reported no change. Compared to the year-ago quarter, six banks reported EPS declines, while two banks reported increases and one reported no change.

Regions and M&T reported year-over-year EPS increases and quarterly declines, while Truist and Citizens were the only two banks to report both sequential and year-over-year declines.