How do you interpret FDIC deposits data?

Ask an Economist

I work for a local government in Kansas and recently discovered FDIC deposit data by county, zip code, institution. I was wondering what an increase or decrease in deposits might indicate about a community? I couldn't find discussion on-line regarding how to interpret this FDIC data. Thanks for you help. -Mike


Information on changes in deposits at commercial banks can be useful in gaining a better understanding of a local economy. However, determining whether an increase in deposits is positive, negative, or neutral can be difficult if the reason for the increase is not known. An increase in deposits, for example, might reflect an increase in cash flow from a local customer base. If the heightened level of deposits is combined with stronger lending activity, since community depository institutions require deposits to make loans, the increased level of deposits might be interpreted as a signal of strength for the local economy. An increase in deposits, however, that is not combined with increased lending activity could signal weak demand for local business investment. Related, deposits may also increase if the local customer base believes there is a lack of alternative investment opportunities, either from a business or personal perspective. To complicate matters further, depository institutions compete for customer deposits across locales and with institutions offering financial products online. Deposits at a local level may decline, therefore, if customers are increasingly making deposits outside the local area. However, this would not necessarily point to weakness in the local economy, but rather a shift in preferences for financial products or services. In sum, information on local deposits can be useful, but should be assessed with other local indicators to gain a better understanding of how to interpret changes, much in the same way that one’s individual reasons for making deposits at a bank can reflect different pictures of one’s own personal finances and his or her outlook for the future.


Last updated on February 2, 2017