Most community banks experienced little residual fallout from the failures of Silicon Valley Bank and Signature Bank in March, according to a new report by fintech IntraFi.
The Q1 2023 survey of executives at more than 567 unique banks found that 77% surveyed saw no change in deposits in the immediate aftermath of the two bank failures. During that time, only 14% of banks surveyed reported outflows of deposits of at least 2%, while 9% instead saw deposits rise.
“It has been mostly business as usual for community banks,” said Mark Jacobsen, co-founder and CEO of IntraFi. “The survey shows just how unique some of these banks’ business models were, with a heavy reliance on uninsured deposits.”
The vast majority of banks hold less than 35% of uninsured deposits, according to the survey, compared with Silicon Valley Bank, which had 94% of its deposits uninsured, and Signature, which had 89%. First Republic Bank had 67% of its total deposits uninsured at yearend.
Following the two March failures, 68% of banks surveyed reported an increase in customer calls about the safety of their deposits, but bankers were able to reassure them. Sixty-two percent of banks said they are working to educate customers on how to access greater levels of deposit insurance.
The Federal Reserve launched a new Bank Term Funding Program designed to alleviate liquidity concerns at banks following the failures of SVB and Signature, but the survey found that only 18% of banks took advantage of it.
Other Survey Highlights:
- Funding Costs. 96% of banks experienced higher funding costs during the past 12 months, the highest number ever recorded since the survey was launched.
- Deposit Competition. Deposit competition remains stiff, with 87% of bankers responding that it had increased over the past year. Seventy-three percent said they expect it to worsen in the year ahead.
- Loan Demand. Loan demand remains on the decline according to most banks, and 43% see a moderate or significant drop in the 12 months ahead.
- Access to Capital—Roughly three quarters of banks surveyed have not seen any significant change in access to capital. This number has remained in the same range since the 3rd quarter of 2021.
IntraFi’s Q1 2023 Bank Executive Business Outlook Survey, released on May 3, garnered responses from CEOs, presidents, CFOs, and COOs at 567 unique banks across the country. The survey was conducted prior to the May 1 failure of First Republic Bank.
Go here to read the full report.
