Deposit Wars: A Breakdown of Key Trends in the First Quarter of 2019

By Adam Mustafa, President & CEO

Deposit growth in the banking industry has become a zero-sum game for all intents and purposes.  Several months ago we published a white paper that revealed the deposit dilemma appeared more serious than anticipated, based on 2018 data.  The results in the first quarter of 2019 were mixed.  Here are five significant findings from our analysis of first quarter deposits:

  1. The growth in CDs exceeded the growth in all deposits, including CDs. Total deposits including CDs only grew by $78.5 billion in the quarter versus the fourth quarter of 2018.  I guess some growth is better than no growth or shrinkage, but when you consider that retail and jumbo CDs grew by $114.9 billion in the quarter, that silver lining is more like a plastic one.  If you think this is a misprint, think again. The only way CD growth can exceed all deposits including CDs is if other deposit products shrink.  Transaction accounts, the highest quality form of deposits, and MMDAs both lost ground in the quarter.

In a nutshell, the least-sticky and most expensive form of deposits (CDs) are growing at the expense of the most-sticky and least expensive product (transaction accounts). They are absorbing virtually all the growth in the supply of deposits in the banking system.

  1. Community banks with assets between $10 billion and $50 billion and $1 billion to $10 billion held their own in the quarter. Both groups combined won 64 percent of the total deposit growth in the quarter. Moreover, both groups seemed to do so in a relatively balanced way across deposit products. The $10 billion to $50 billion group grew transaction accounts by a combined $5 billion during the quarter, which represented 21 percent of its total growth.  The $1 billion to $10 billion group at least didn’t lose transaction accounts, but only nibbled its way to $868 million of growth in this category.

For what it’s worth, community banks under $1 billion, which had a relatively strong 2018 in transaction account growth, lost ground in the first quarter by shedding $2.9 billion of transaction accounts.  Who knows if this is an aberration or the beginning of a trend, but it does suggest size matters, and community banks might be far better off teaming up with one another through M&A, rather than continuing to slug it out.

  1. The “Big Four” (JP Morgan, Bank of America, Citibank, and Wells Fargo) lost ground in the quarter. It is well-known in the industry that the Big Four has significantly increased its market share in the post-crisis decade.   However, during the last year and change, these banks slipped a little, predominantly due to the Fed’s reversal of quantitative easing.  Combined, the Big Four only grew its deposits by $4.8 billion, which is just 6 percent of the total growth in the industry.  The top 4 banks felt the brunt of the pain in terms of losing transaction accounts and even savings accounts, compensating by raising CDs. Only Citibank had a strong quarter overall. It led the country with $20.9 billion of deposit growth, of which $15.4 billion came from the elusive and lucrative transaction accounts.

Between the relative success of community banks and the recent struggles of the top 4 banks, one may conclude that community banks are more than holding their own.  However, the top 4 banks all have a LTD ratio under 70 percent and have not been growing their loan portfolios, which suggests that they have not yet felt the urgency to release their arsenal on the banking market — or we haven’t yet felt the impact of their existing initiatives.  For example, we have yet to see the results from JPMorgan’s heavily-discussed branch expansion plans, which include 400 new locations over the next five years or Citi’s ROI from massive investments in digital banking.

  1. A shocking 77 percent of banks across the country saw their NIMs decline in the first quarter of 2019 versus the fourth quarter of 2018. This is a significant departure from what we have seen over the previous four quarters, when at least 50 percent of the banks saw NIMs expand rather than contract. However, a closer look at that trend reveals that the number of banks with expanding NIMs was declining, and it fell off a cliff in the first quarter of 2019.  NIMs are still relatively high, but it’s very troubling for banks that are loaned up and are having to fund their liabilities at the marginal cost.

It’s also becoming more difficult for banks to compensate by procuring higher loan yields, as our BankGenome™ database shows that prepayment rates are increasing and renewal rates are decreasing as borrowers shop around to pre-empt an increase in their borrowing costs.

  1. Despite the generally morbid tone of this piece and our popular white paper summarizing key deposit trends in 2018, there were plenty of winners, both large and small in the industry. Below is a list of the top winners and losers in the industry for the quarter (adjusted for M&A), both overall and within the $1 billion to $10 billion asset size group as a sample:

Top Ten Winners – Total Deposits (All Banks)

1Citibank, National Association+ $20,858,000
2JPMorgan Chase Bank, National Association +$14,076,000
3Capital One, National Association +$9,764,698
4Goldman Sachs Bank USA +$7,600,000
5Ally Bank +$7,318,000
6Chase Bank USA, National Association +$4,994,443
7USAA Federal Savings Bank +$4,526,525
8U.S. Bank National Association +$4,193,864
9CIT Bank, National Association+ $3,536,114
10PNC Bank, National Association+ $3,504,210

Top Ten Losers – Total Deposits (All Banks)

1Wells Fargo Bank, National Association ($16,218,000)
2Bank of America, National Association ($13,960,000)
3The Bank of New York Mellon ($13,431,000)
4Charles Schwab Bank ($12,176,000)
5State Street Bank and Trust Company ($12,021,578)
6Morgan Stanley Bank, National Association ($10,549,000)
7Capital One Bank (USA), National Association ($5,123,511)
8TD Bank, National Association ($2,585,004)
9The Huntington National Bank ($2,442,493)
10UBS Bank USA ($2,361,440)

Top Ten Winners – Total Deposits ($1-10 Billion in Assets Only)

1Manufacturers Bank +$1,422,317
2NexBank, SSB +$887,614
3Green Dot Bank DBA Bonneville Bank +$756,183
4Bell Bank +$708,377
5Israel Discount Bank of New York +$554,039
6Woodforest National Bank +$455,099
7Seacoast National Bank +$429,180
8SouthEast Bank +$394,058
9Live Oak Banking Company +$374,969
10HomeStreet Bank +$352,184

Top Ten Losers – Total Deposits ($1-10 Billion in Assets Only)

1Wilmington Trust, National Association ($828,923)
2Bessemer Trust Company, National Association ($767,472)
3EagleBank ($296,185)
4John Deere Financial, f.s.b. ($238,315)
5Atlantic Capital Bank, National Association ($232,188)
6Union Bank and Trust Company ($207,860)
7Washington Trust Bank ($186,612)
8Silvergate Bank ($185,670)
9 Banc of California, National Association ($171,961)
10BNB Bank ($162,122)

If you would like to see how your bank ranks in the quarter across all deposits or any deposit category by asset size, state, or a selected peer group, we would be happy to provide you with a complimentary report.  Please send an email to George Callas at or call him at (718) 219-0441 with your request.