US banks' uninsured deposits fell $597.49 billion in the first quarter — a 7.8% sequential decline and a 15.2% drop year over year.
Uninsured deposits became a focus area after the bank failures in March. For Silicon Valley Bank and Signature Bank, which had high levels of uninsured deposits, regulators applied systemic risk exceptions so all deposits would be protected. However, they did not apply the exception to First Republic Bank when it failed in May and was purchased by JPMorgan Chase & Co., which agreed to assume all of its deposits and substantially all of its assets.
US banks' uninsured deposits have fallen since the first quarter of 2022, by both the dollar amounts of uninsured deposits and the percentage of total deposits. The latest quarter-over-quarter drop was the steepest yet.
The industry reported $7.118 trillion in uninsured deposits at March 31, making up 42.2% of total deposits minus exclusions. This was down from $7.716 trillion, or 44.9% of total deposits, at Dec. 31, 2022, and $8.398 trillion, or 47% of total deposits, in the year-ago period.
The rate of uninsured deposits in this analysis is based primarily on bank subsidiary estimates made in regulatory call report filings, and it may include items such as intercompany deposits, collateralized deposits that are backed with securities and other deposits structured to qualify for insurance and can differ from parent company filings like Forms 10-Q, which may exclude such items.
For some companies, the amount reported in call reports may be significantly higher than what is reported in parent company filings due to these exclusions.
QOQ changes among the largest US banks
Twenty of the 25 US banks that had at least $25 billion in assets at March 31 reported a quarter-over-quarter decline in uninsured deposits.
Among the Big Four banks, the banking subsidiaries of Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. reported drops in uninsured deposits. JPMorgan Chase Bank NA reported a 1.9% hike and likely picked up more uninsured deposits following its acquisition of First Republic after its failure. At the end of March, First Republic reported $50.84 billion in uninsured deposits, including $30 billion from the 11 large banks.
Among the banks in the analysis, BankUnited NA posted the largest sequential drop in total uninsured deposits with a decline of 28.6%.
First-Citizens Bank & Trust Co. Inc. posted the largest quarterly increase as its uninsured deposits more than doubled following its acquisition of all customer deposits and certain other liabilities of Silicon Valley Bridge Bank NA.
Banks with the most uninsured deposits to total deposits
Among banks with more than $25 billion in assets, Deutsche Bank Trust Co. Americas reported the largest proportion of total deposits as of March 31, at 96%, according to an analysis by S&P Global Market Intelligence.
Bank of New York Mellon was second with 93.7%, though two-thirds of its deposits were operational. Of the total deposits held by State Street Bank and Trust Co., 90.6% were uninsured, but 75% were operational, according to a first-quarter earnings presentation.
Of the three, Bank of New York Mellon had the lowest proportion concentration of loans and held-to-maturity (HTM) securities out of total deposits at 29.51%. That was also the lowest proportion out of all the top 25 banks as measured by uninsured deposits.
Accounting rules do not require banks to mark the HTM portfolios to market, but regulators have openly worried about the capital hits banks would take if they were forced to sell underwater securities in a time of stress.
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Typically, trust banks, such as Bank of New York Mellon, Northern Trust Co. and State Street, and banks with large corporate client bases, tend to have higher levels of uninsured deposits. The companies describe much of their uninsured corporate deposits as "stickier" than uninsured retail deposits.
In the case of corporate client deposits, those can be stickier because of their necessity for business operations to pay payroll, collect money from vendors, and for other regular corporate operations. They may be well-integrated with treasury management services provided by the bank, which would make moving deposit accounts to another financial institution a significant undertaking.
Separately, a municipal deposit backed by pledged securities such as Treasurys would have collateral available to make up for any shortfall from deposit insurance.
Expanding ways to insure deposits
As customers look for ways to lower their uninsured deposits, some banks are increasing their usage of "deposit spreading" services, such as those offered by IntraFi Network LLC, and encouraging their customers to use those services.
For example, on June 1, Synovus Bank reported that it had expanded capacity through the IntraFi Network to $10 billion from $4.5 billion after the first quarter ended, according to a Form 8-K filing.
Prior to that, the bank reported $24.48 billion in uninsured deposits at March 31, or 48.4% of its total deposits, according to the bank's call report.