The Federal Deposit Insurance Corporation released its latest "Quarterly Banking Profile yesterday, which showed that "Deposit Growth Remains Strong" and that uninsured noninterest bearing transaction accounts left over from the temporary "TAG" (transaction account guarantee) program continue to remain, and even grow, in the largest banks. In a press release entitled, "FDIC-Insured Institutions Earned $40.3 Billion in the Fourth Quarter of 2013," FDIC Chairman Martin J. Gruenberg comments, "The trend of slow but steady improvement that has been underway in the banking industry since 2009 continued to gain ground. Asset quality improved, loan balances were up, and there were fewer troubled institutions. However, challenges remain in the industry. Narrow margins, modest loan growth, and a decline in mortgage refinancing activity have made it difficult for banks to increase revenue and profitability. Nonetheless, these results show a continuation of the recovery in the banking industry."
The latest Quarterly says, "Increased balances in large-denomination accounts were responsible for much of the growth in deposits in the fourth quarter. Total deposits increased by $163.8 billion (1.5 percent), as balances in domestic offices rose by $191.3 billion and foreign office balances fell by $27.4 billion. Deposits in domestic accounts with balances greater than $250,000 rose by $166 billion (3.5 percent). Nondeposit liabilities fell by $55.1 billion (2.9 percent), largely because of a $42 billion (12.1 percent) decline in securities sold under repurchase agreements. Banks increased their advances from Federal Home Loan Banks by $33.1 billion (8.9 percent)." Total deposits were $11.2 trillion.
It continues, "Total assets of the 6,812 FDIC-insured institutions increased by 0.9 percent ($126.6 billion) during the fourth quarter of 2013. Total deposits increased by 1.5 percent ($163.8 billion), domestic office deposits increased by 2 percent ($191.3 billion), and foreign office deposits decreased by 1.9 percent ($27.4 billion). Domestic noninterest-bearing deposits increased by 2.1 percent ($54.0 billion) and savings deposits and interest-bearing checking accounts increased by 2.8 percent ($151.2 billion), while domestic time deposits decreased by 0.8 percent ($13.9 billion). For the twelve months ending December 31, total domestic deposits grew by 3.6 percent ($343.9 billion), with interest-bearing deposits increasing by 3.9 percent ($271.6 billion) and noninterest-bearing deposits rising by 2.8 percent ($72.4 billion). Foreign deposits increased by 2.2 percent and other borrowed money increased by 7.2 percent, while securities sold under agreements to repurchase declined by 21.6 percent over the same twelve-month period."
The FDIC writes, "At the end of the fourth quarter, domestic deposits funded 66.5 percent of industry assets, the largest share since the fourth quarter of 1993, when the share was 67.9 percent. Insured institutions held $2.6 trillion in domestic noninterest-bearing deposits on December 31, 2013, 72 percent of which ($1.9 trillion) were noninterest-bearing transaction accounts larger than $250,000. Of the $1.9 trillion, $1.7 trillion exceeded the basic coverage limit of $250,000 per account. The expiration of the unlimited deposit insurance coverage for noninterest-bearing transaction accounts at the end of 2012 appeared to have little impact on industry deposit levels during 2013. The aggregate amount exceeding the $250,000 limit in noninterest-bearing transaction deposits increased by 7.9 percent ($122.5 billion) since the end of 2012. Table 1 shows the distribution of noninterest-bearing transaction accounts larger than $250,000 by institution asset size."
A footnote explains, "The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) enacted on July 21, 2010, provided temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts from December 31, 2010, through December 31, 2012, regardless of the balance in the account and the ownership capacity of the funds. The unlimited coverage was available to all depositors, including consumers, businesses and government entities. The coverage was separate from, and in addition to, the insurance coverage provided for a depositor's other accounts held at an FDIC-insured institutions."
The FDIC's update also tells us, "Total estimated insured deposits increased by 0.7 percent during the fourth quarter. Estimated insured deposits declined by 18.8 percent from the prior year-end primarily due to the expiration of the temporary unlimited insurance coverage on noninterest-bearing transaction accounts. Estimated insured deposits covered by the $250,000 insurance limit, however, increased by 2.5 percent during 2013. For institutions existing at the start and the end of the fourth quarter, insured deposits increased during the quarter at 3,500 institutions (51 percent), decreased at 3,289 institutions (48 percent), and remained unchanged at 29 institutions." The FDIC's tables show that over 74.0% of the $1.888 trillion in domestic noninterest bearing transaction accounts larger than $250K is held in institutions with assets over $100 billion.
Finally, it adds, "The condition of the Deposit Insurance Fund (DIF) continues to improve. The DIF increased by $6.4 billion during the fourth quarter to $47.2 billion. The main drivers of the increase were a negative provision for insurance losses of $4.6 billion -- reflecting a reduction in estimated losses from failed institution assets -- and assessment income of $2.2 billion. Interest revenue, other miscellaneous income, and unrealized gains on available-for-sale securities added another $57 million. Fourth quarter operating expenses reduced the fund balance by $436 million. For all of 2013, 24 insured institutions with combined assets of $6 billion failed, down from 51 failures with combined assets of $11.6 billion in 2012. The DIF's reserve ratio -- the DIF fund balance as a percent of estimated insured deposits -- was 0.79 percent as of the fourth quarter, up from 0.68 percent in the prior quarter and 0.44 percent one year earlier."
