Credit union leaders can take note of the Federal Deposit Insurance Corp.’s (FDIC) latest U.S. quarterly banking profile ending March 31, which might portend what’s happening in the banking industry and financial services marketplace currently (quarter ending June 30).
U.S. banks insured by the FDIC (more than 4,670 reporting) lost $472 billion in deposits during a quarter that has been described as the most challenging banking period since the 2008 financial crisis. This deposit decline was the largest since the FDIC began collecting quarterly industry data in 1984 and marked the fourth consecutive quarter of industry outflows.
The drop in deposits, which amounted to -2.5 percent, was largely due to movement by uninsured depositors who were above the $250,000-per-account level backstopped by the FDIC. They pulled $663 billion, but insured deposits actually increased by $255 billion.
Additionally, these banks ended the quarter with a sizable amount of unrealized losses on investment securities on their balance sheets ($515 billion). However, these “paper losses” don’t count against earnings for most banks unless the assets are sold.
The more lasting effects of the industry’s response to this stress may not become fully apparent until second-quarter results (ending June 30) are released later this year in late August, FDIC Chair Martin Gruenberg said. He added that credit quality and profitability may weaken due to these risks and result in a further tightening of loan underwriting, slower loan growth, higher loan loss provision expenses, and liquidity constraints — citing specific challenges in commercial real estate loans backed by office properties.
“The banking industry continues to face significant downside risks from the effects of inflation, rising market interest rates, slower economic growth, and geopolitical uncertainty,” Gruenberg noted.
You can view the following subsets of charts, graphs, trends, and data from the FDIC report here:
