Are America’s regional banks over the worst of it?

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mmeal people paying attention to America’s regional banks than ever before. But it is difficult to calculate the state of their balance sheets. Recent data from the Federal Financial Institutions Research Council, a regulator, provides insight. Our analysis reveals that several regional banks are struggling with flying deposits, interest rate imbalances and expensive loans. Even if none are going to collapse, the outlook is bleak.

Start with investments. Before the March panic, savers were moving money into high yielding money market funds. The collapse of Silicon Valley Bank (etc) speed up the movement. Accounts with balances over the $250,000 federal insurance limit fell nearly 5% across the banking system — and more than 11% at medium-sized borrowers. At PacWest, an institution in California, total deposits fell 17% and uninsured ones by more than half.

Many banks are still sitting on billions in unrealized losses. The data shows that American banks have a total of more than $500bn in such losses on their securities portfolios. Charles Schwab, a broker that has seen its share price fall by two-fifths this year, is holding more than $21bn in paper losses through its banking subsidiaries. When etc his securities fell to 100% of the principal equity capital (see chart).

Outstanding lending at American banks reached $1.3trn in the last quarter, up more than 40% on the previous one. At large institutions, lending rose 26%; at medium ones, it more than doubled. Schwab reported $39bn of short-term advances from the Federal Home Loan Banks.flb), up from $12bn in the previous three months. KeyBank, an Ohio-based lender, borrowed $19bn in the short term flb loans, up from $11bn. Such loans come at today’s high interest rates. Banks that rely on them may survive the crisis. But they may see their profits suffer.

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