After last month's turmoil, many banks saw little deposit movement

Silicon Valley Bank
While customers lined up outside Silicon Valley Bank's headquarters in Santa Clara, California, after the second largest bank failure in U.S. history, many smaller banks did not see significant deposit inflows or outflows.

Silicon Valley Bank's failure led to widespread worries that many banks' deposits were at risk of flowing to larger banks, but a new survey shows most institutions saw little movement at all.

Some 77% of banks did not did not see significant deposit inflows or outflows, according to an IntraFi survey of executives at 567 banks, the vast majority of which have less than $10 billion in assets. Another 14% of the respondents said deposits fell by at least 2%, while 9% said deposits rose by at least that amount. 

The survey's findings highlight the stability of many banks' deposits in the face of worries over the ripple effects from the second largest bank failure in U.S. history.

It helped that smaller banks surveyed were able to reach out personally to customers in their communities and ease any concerns.

"That is one of the big advantages of community banks," said Paul Weinstein, senior policy adviser at IntraFi. "They're smaller and they're dealing with customers more directly."

That's not to say customers didn't ask their banks about whether their money was safe. About 68% of the banks surveyed said they heard more inquiries from customers on the issue, while 32% said it was "mostly business as usual." 

"There was clearly anxiety among depositors … but that anxiety seemed to wane," Weinstein said.

Some regional banks have reported deposit outflows in their quarterly earnings reports this month, including Dallas-based Comerica; Birmingham, Alabama-based Regions Financial; Salt Lake City-based Zions Bancorp; and Providence, Rhode Island-based Citizens Financial Group.

Other smaller banks that are publicly traded said they didn't see much movement over the past month.

"The events of the weekend of March 10 had virtually no impact on us beyond the minimal level of customer inquiries," Mark Tryniski, CEO of the $15.3 billion-asset Community Bank System in DeWitt, New York, said on a quarterly earnings call, according to an S&P Global Market Intelligence transcript.

At Old Second Bancorp in Aurora, Illinois, Chief Financial Officer Bradley Adams said that he was visiting the bank's lobby, given the worries about the industry, "just waiting to see if there were lines down there or if anybody had brought in backpacks to carry the cash."

"Quite frankly, we saw none of it," Adams said on an earnings call, according to an S&P Global Market Intelligence transcript. "It looked like a normal week. No pickup in traffic, no pickup in transactions, nothing online, no increase in wire activity."

That's because the $5.9 billion-asset bank is a "bit different than most," Adams said, with nearly two-thirds of its deposit accounts coming from retail customers who have less than $10,000 in total balances. Many other banks have larger shares of commercial customers. Silicon Valley Bank's failure was partly due to its concentration of large, mostly uninsured deposits from tech companies and venture capital firms.

Though Silicon Valley Bank's business model was unusual, last month's failure has prompted banks and their customers to look closely at any deposits that aren't covered by the Federal Deposit Insurance Corp.

The agency's general coverage limit is $250,000, but there are several alternatives for customers to get their money insured without going to another bank. Six in 10 bankers who responded to the survey said they were working to educate those customers on ways to get more of their money covered by the FDIC. 

Those options include getting couples to open joint accounts, where coverage goes up to $250,000 per co-owner, or adding beneficiaries to an account.

They also include back-end technology solutions, whose popularity has surged over the past month. IntraFi, R&T Deposit Solutions, StoneCastle Cash Management and ModernFi are among the companies that help banks place customers' excess deposits into other banks so their money is fully covered.

The survey shed light on the levels of uninsured deposits across the industry, particularly at small banks with less than $1 billion of assets, which don't have to disclose that data in quarterly call reports.

Those small banks were less likely to have uninsured deposits, the survey showed. About 83% of them had less than 35% of their deposits uninsured, compared with 76% of banks with $1 billion to $10 billion of assets and 72% of lenders with more than $10 billion of assets.

The survey also found that the vast majority of respondents had not tapped a new Federal Reserve facility that helps banks with underwater securities. The value of those securities fell when interest rates rose last year. 

While 18% of the banks reported using the Fed program, the remainder responded that they had not done so. The survey took place between April 4 and 14.

Some banks are taking a more cautious approach in their lending in light of last month's bank failures, the survey found. Nearly one in four bankers said they were delaying or slowing plans to expand their balance sheet, while 18% said they were raising their lending standards and adjusting credit parameters.

Many bankers expressed a somewhat pessimistic outlook on the economy, but did not appear to be anticipating a major downturn. Nearly half of those surveyed said they expect economic conditions to be "moderately worse" a year from now, while 5% said they anticipate the economy will be "significantly worse." More than a third expected the economy to stay about the same, and only 10% anticipated moderate improvements.

IntraFi conducted the quarterly survey online, gathering responses from individuals at 567 banks. Respondents were either bank CEOs, presidents, chief financial officers or chief operating officers.

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