- Following the pandemic-induced surge in bank deposits in 2020 and 2021, total deposit growth_ across community banking organizations_ (CBOs) came to a virtual halt at the onset of quantitative tightening in early 2022. Since then, the composition of deposits has shifted considerably amid higher interest rates and increased competition.
- Most CBOs experienced declines in core deposits_ in 2023; however, runoff stabilized in the latter half of the year. Core deposits were replaced in part by non-core deposits,_ primarily time deposits above the FDIC insurance limit and brokered deposits.
- The composition of core deposits has shifted, with the greatest declines seen in typically rate-sensitive savings and money market deposit accounts (MMDAs). As non-maturity deposit balances declined in 2023, time deposits increased at a rate of 42 percent year-over-year and now represent almost 25 percent of total deposits.
- Amid core deposit runoff, CBOs also turned to brokered deposits and other borrowings, which saw year-over-year increases of 39 percent and 28 percent, respectively. However, utilization of these funding sources slowed in the latter half of the year.
Questions or comments? Please contact KC.SRM.SRA.CommunityBankingBulletin@kc.frb.org
Endnotes
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1
Growth rates are adjusted for merger activity. Merger-adjusted calculations add the assets and liabilities of acquired institutions to the acquiring institutions in previous periods.
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2
Community banking organizations are defined as having less than $10 billion in total assets.
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3
Core deposits as defined by the FFIEC Uniform Bank Performance Report: transaction accounts, savings accounts, MMDAs, and time deposits below $250M, excluding brokered time deposits less than $250M.
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4
Non-core deposits include time deposits above $250M, brokered deposits, and foreign office deposits.
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.