Liquidity Concerns Deepen for Regional Bankers

A new report assessing trends in regional banking shows that community banks continued to be hammered as consumers, spooked by recent failures of large national banks, continue to withdraw deposits. For a second straight month, checking deposits decreased to a record low in a 10-state region that includes Missouri and Kansas.

Meanwhile, 84.6 percent of bank CEOs continue to report insolvency challenges, according to the latest Rural Mainstreet Index. The index is compiled monthly by Creighton University economist Ernie Goss. Its checking-deposit index plummeted to a a low of 22.0 from April’s 25.0, while the index for certificates of deposit and other savings instruments declined to 70.0 from April’s 74.0.

“Two consecutive record low checking deposit indices point to higher deposit outflows, even for community banks,” said Goss. 

In addition, only 15.4 percent of bank CEOs anticipate a near-term end of the banking insolvency crisis, while the vast majority expect banks to continue to report insolvency challenges.

James Brown, CEO of Hardin County Savings in Eldora, Iowa, said, “The liquidity problem will continue for some time, and we will see more regulation because of it. And as a bonus for their (regulators) being late to the table, we will all pay higher FDIC payments for as long as we can see.”

Jeff Bonnett, CEO of Havana National Bank in Havana, Ill., said, “I hope that the ICBA and state community bank associations can be successful in clarifying my point as ‘community banks’ should NOT pay for this big bank mess with increased FDIC assessments.”