U.S. banks' loan-to-deposit ratio rose in the second quarter as loan growth continued to accelerate and deposit growth slowed.

The aggregate loan-to-deposit ratio for the industry was 60.2%, up from 57.0% in the first quarter and 58.0% in the year-ago period, according to S&P Global Market Intelligence data. That increase marked the first time the industry's loan-to-deposit ratio surpassed 60% since the fourth quarter of 2020.

Loan growth accelerates

Total loans and leases at U.S. banks amounted to $11.771 trillion in the second quarter, up 3.7% quarter over quarter and up 8.4% from one year ago. In the second quarter, U.S. banks saw the largest quarterly increase in their net interest margins since 2010, aided by the Federal Reserve's aggressive tightening.

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Although there are concerns about loan growth outlooks due to rate hikes and strengthening headwinds, many banks maintained their bullish outlooks on loans. For example, JPMorgan Chase & Co. and Bank of America Corp. continue to expect mid- to high-single-digit loan growth for the year.

"It feels like business leaders may talk themselves into less confidence so that may dampen loans growth," Bank of America CFO Alastair Borthwick said on the company's second-quarter earnings call. "But as of right now, we think it's still in that kind of mid- to high-single digits."

However, some banks such as Wells Fargo & Co. and Regions Financial Corp. warned that loan growth may slow down in the coming quarters.

"I just don't think what we've seen in the second quarter will continue to happen at the same pace. We may get surprised, and it will be a little better than we think. But I think at some point, we just feel, as you look at any of the uncertainty that might be there or other factors that are causing clients to use their lines today, that just may moderate as we go through it," Wells Fargo CFO Michael Santomassimo said on the company's earnings call.

Regions expects to hold total loans stable throughout the rest of the year.

"We may be a little conservative in terms of our loan balances from here on out. What we wanted to make sure is we don't want to send the message that we're going to grow at the pace we just did in the first quarter," Regions Financial CFO David Jackson Turner said on the company's second-quarter earnings call. "It's a bit of a cautious tone is all we're sending."

Deposit growth slowing

Total deposits climbed 4.4% year over year to $19.562 trillion, but the pace of growth slowed compared to the same quarter in 2021 when deposits rose 10.4%. On a sequential basis, total deposits dropped 1.9%.

Several banks, including the majority of large U.S. banks, saw their deposits fall in the second quarter. Deposit pricing pressure also started heating up following the Fed's recent rate hikes and the outlook for more increases expected later in the year.

While some banks see deposit runoff continuing, a few banks, such as Citigroup Inc., are still expecting to report growth in deposits.

"The pressure from quantitative tightening, I think, will certainly play out over time, but again, our focus is on growing the operating deposits that we have with clients. And we think we've got good traction and ability to continue momentum with those operating deposits," Citigroup CFO Mark Mason said on the company's second-quarter earnings call.

Largest year-over-year declines

Among the top 20 banks with the largest year-over-year decrease in loan-to-deposit ratio, only seven logged year-over-year loan growth, while 19 reported year-over-year deposit growth. Similar to the previous quarters, big Paycheck Protection Program lenders WebBank and Celtic Bank Corp. led the list with 471.7- and 276.7-percentage-point decreases, respectively, in their ratios.

Largest year-over-year increases

Out of the top 20 companies with the largest increase in loan-to-deposit ratios, 19 saw growth in loans, while only nine booked growth in deposits. Northeast Bank topped the list with a 44.8-percentage-point hike in its ratio to 100.2%.