Regional Bank Earnings Show Big Deposit Withdrawals

Rising net interest income boosts earnings—for now

General view of First Republic Bank in Century City on March 17, 2023

AaronP/Bauer-Griffin / Getty Images

Six of eight closely watched regional and mid-sized banks reported first-quarter earnings that met or exceeded analysts' expectations, buoyed by higher net interest incomes, in a period marked by declining deposits and turmoil throughout the banking system.

First Republic Bank, East West Bancorp, PacWest Bancorp, Comerica Inc., Western Alliance and Keycorp all beat expectations, while Zions Bancorp and Fifth Third Bancorp missed. Yet the drop in deposits, consistent with expectations, presents challenges as beneficial year-to-year rate comparisons diminish.


  • Banking system turmoil didn't derail profit growth at key regional/mid-sized banks.
  • Deposits decreased broadly in line with expecatations.
  • Favorable year-to-year comparisons for net interest income will roll off in coming quarters.

Net interest income drove earnings higher at the majority of the banks, which received heavy scrutiny in March after two of their peers, Silicon Valley Bank and New York-based Signature Bank, failed. Per-share earnings increased at five of the eight banks, with a median gain of 4.5%.

First-Quarter Results at Key Regional and Mid-Sized Banks
  Q1 adjusted EPS and % gain/(loss) from year ago  +/- consensus projected EPS in cents (c) Total Deposit Growth since end of Q4  +/- expected deposit growth in percentage points (pp)
First Republic (FRC)  $1.23 and (39%)  +38c  -41%  -18 pp
Zions Bancorp (ZION)  $1.33 and 5%  -19c  -11%  +1 pp
East West Bancorp. (EWBC)  $2.32 and 40%  +12c  -2%  -1 pp
PacWest Bancorp. (PACW)  $0.66 and (35%) Same -17%  0 pp
Comerica Inc. (CMA)  $2.39 and 74%  +8c  -10%  +1 pp
Western Alliance Bancorp. (WAL)  $2.30 and 4%  +24c  -11%  -2 pp
Fifth Third Bancorp. (FITB)  $0.78 and 15%  -1c  0  0 pp
Keycorp (KEY)  $0.44 and (2%)  +1c  1%  +2 pp

In the wake of those failures, fear involving heavy unrealized balance sheet losses throughout the banking system hit regional and mid-sized banks particularly hard, sending their stocks reeling.

That fear precipitated deposit withdrawals throughout much of the banking system outside the nation's giant money-center institutions. Deposits declined a median 10.5% at these eight banks.

Deposits fund the bulk of operations for regional and mid-sized banks. Declining deposits raises concerns that banks with unrealized losses in securities may have to sell some of those securities to meet withdrawal requests—thereby realizing losses that will hamper profitability.

Meanwhile, the net interest income boost that many banks received in the first quarter won't repeat to the same degree in coming quarters. The Federal Reserve didn't start raising interest rates until late in last year's first quarter, meaning that this year's first-quarter net interest income represented a generally favorable year-to-year comparison.

Consequently, regional and mid-sized banks that essentially sidestepped the March's banking turmoil with their first-quarter profit reports may face higher hurdles in trying to repeat the same level of growth later this year.

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