U.S. banks saw declines in their overdraft fee income worsen in the fourth quarter of 2022, capping a year in which regulators and the White House applied increased pressure on the industry.

U.S. banks consistently reported quarter-over-quarter declines in overdraft-related income throughout 2022 as many institutions moved away from the practice due to regulatory and competitive pressures. The most recent decrease marks the largest quarter-over-quarter fall in the past year.

The industry reported a total of $1.55 billion in overdraft-related service charge income in the fourth quarter, down 12.4% from the linked quarter when banks brought in $1.77 billion in overdraft-related income and 33.8% from the year-ago period when they reported $2.34 billion.

The latest quarter-over-quarter decline is an acceleration from the 9.5%, 9.6% and 7.7% drops reported in the first, second and third quarters of 2022, respectively.

Overall consumer deposit fee income

As overdraft fee income sinks, deposit fees now make up less of U.S. banks' income. At Dec. 31, 2022, service charges and fees on consumer deposits made up just 1.24% of banks' operating revenue. This metric dropped for the fourth consecutive quarter and was down from 1.34% in the linked quarter and 1.78% in the year-ago period.

Overdraft-related charges, maintenance service charges and ATM fees totaled roughly $3.02 billion in the quarter, down from $3.29 billion in the third quarter of 2022.

While overdraft fee income has drastically declined over the past year, ATM fee and maintenance fee incomes have remained largely steady.

* Explore S&P Global Market Intelligence's top 20 banks ranked by service fees as a proportion of operating revenue. *Read some of today's top news and insights from S&P Global Market Intelligence.

Highest proportion of deposit fee income

The industry median for service charges and fees on consumer deposits as a proportion of operating revenue held steady at 1.4% in the fourth quarter, but some banks depend more on fee income than others.

Service charges on consumer deposit accounts made up more than 10% of eight U.S. banks' operating revenue in the fourth quarter, up from just five banks in both the second and third quarters of 2022. The change was likely due to some banks only reporting this data once a year in December.

Woodforest National Bank sat atop the list of U.S. banks with the highest proportion of consumer deposit fees to operating revenue throughout 2022, but First National Bank Texas dethroned Woodforest in the last quarter of the year.

The Killeen, Texas-based bank reported total service charges on consumer deposits of $128.5 million, or 30.2% of its operating revenue.

Most deposit fee income

The list of U.S. banks with the most deposit fee income got a new leader after one institution held the top spot for much of the year.

JPMorgan Chase & Co. topped the list in the fourth quarter of 2022 after Wells Fargo & Co. held first place for both the second and third quarters. JPMorgan reported $2.34 billion in deposit fee income at Dec. 31, 2022, up 9.1% year over year, despite announcing changes to its overdraft policies in December 2021.

Bank of America Corp. ranked third among banks with the most consumer deposit fee income, down from topping the list in the first quarter of 2022, thanks to a 28.3% decline in deposit fee income year over year.