IDCFP Re-Estimates Brokered CDs for Individual Banks Using Newly Reported Sweep Accounts

IDC Financial Publishing (IDCFP) has attempted over time to estimate brokered CDs for individual banks. The unknown in the equation has historically been the level of sweep accounts in brokered deposits. As of September 30, bank reports, sweep accounts for individual banks were available on the call reports.

IDCFP deducted from the total of brokered deposits of $250,000 or less the value of sweep accounts held at the bank and compared the residual to total time deposits of $250,000 or less. Given the brokered deposits exceeded sweeps and time deposits exceeded the residual, the result is the estimated brokered CDs of $250,000 or less.

The total brokered CDs calculated as the sum of all banks for September 30, 2021 was $183,080 million compared to the DTC value of $184,132 million. IDCFP concludes the estimate for individual banks’ issuance of brokered CDs of $250,000 or less is accurate and available on request for your research.

Brokered CDs of $250,000 or less peaked in March 2019 at $433,310 million and declined to the most recent report on December 31, 2019, to $395,647 million. The significant decline in 2020 was due to Covid and the actions of the Federal Reserve Bank to increase liquidity by adding Treasuries and mortgages to its balance sheet. The rate of decline in DTC reported brokered CDs fell to $15 billion a month in the last three quarters 2020, and then fell to $8.5 billion a month in the first half of 2021, narrowing to $3 billion a month in 2021Q3, and $2 billion a month in the fourth quarter of 2021.

IDCFP estimates with tapering of the Fed’s balance sheet in 2022 with 3 to 4 increases in the fed funds rate, brokered CDs outstanding will decline by $1 billion or less a month in 2022. Late in 2022 or in 2023 the Fed might begin to reduce its balance sheet, allowing maturing securities to runoff and not be replaced.

The economy remains strong going into 2022. A peak in the Covid Omicron variant early in 2022 and an end of the supply chain bottlenecks later in the year indicate a strong economy and loan growth for banks in 2022. Therefore, brokered CDs outstanding are expected to bottom in 2022 and increase 10% or more in 2023, reaching $204 billion by yearend. A prolonged economic recovery could raise brokered CDs to the $300 billion level by 2025.

Chart I

IDCFP has estimates of brokered CDs $250,000 or less outstanding for each issuing bank, available on request. See below a sample list of banks.

Chart II

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John E Rickmeier, CFA

Robin Rickmeier
Marketing Director