With inflation still hovering at 40-year highs nationally, a trend within Mississippi could foretell good news.
Mississippi banks reported deposits for the year ending in June of 2022 at $4 billion more than in 2021. And while a rise of $4 billion in deposits in one year is significant, the numbers are trending down.
Gordon Fellows, the president of the Mississippi Bankers Association, says the influx of money into the banking system is a byproduct of federal funds from the pandemic, which has been a driver of inflation throughout the nation.
“With the pandemic, deposits have been up significantly for the last three years. So, we’re up 20 billion since the beginning of the pandemic. That’s usually about 15 years of depository growth crammed into three years.”
Gordon Fellows, Mississippi Bankers Association
“With the pandemic, deposits have been up significantly for the last three years,” Fellows said. “So, we’re up 20 billion since the beginning of the pandemic. That’s usually about 15 years of depository growth crammed into three years.”
The good news is the downward trend. The year ending in 2020 shows Mississippi deposits up $9 billion. The year ending in 2021 was up $7 billion, and then this year is up $4 billion.
“That speaks to the quality of the banks in the state that they have been able to absorb that much new depository pressure and continue to take care of customers as different government programs have been funneling through the payment check or through the cities and counties and state funds that have all been sent out as grants from the federal government too,” Fellows said.
Acknowledging the trend, Fellows said he believes the growth in deposits is beginning to flatten out, which would be good from an inflationary standpoint.
“All of this deposit growth has meant that people have more money to spend, which is part of what has been fueling inflation,” Fellows said. “Think of the deposits on record as an early indicator. What the banks are telling me is that the dramatic growth is starting to flatten out, and that is good.”
The other part is that Mississippi banks have handled the influx of money without any issues. The state’s banks are collectively holding more money than ever.
“In the community bank business model, you gotta have deposits to fund loans,” Fellows said. “That’s what banks do. They take deposits, and they leverage those deposits to lend money out. As deposits have gone up through the pandemic process, people have had more money to deposit.
“It has given banks more firepower to put money out there,” he said. “If you think about the whole pandemic thing, deposits have been going up at a breakneck rate.”
One thing that Fellows believes is good about stimulus checks in this state is that when money comes to Mississippians, it tends to stay in Mississippi.
“We kind of have a built-in advantage where that is concerned,” he said. “We have a lot of people who are really community-minded in the way they spend their money. Supporting small businesses is really a big thing in our state.
“A person may get a personal stimulus check, which may go to paying employees. That money may go to a local restaurant, which was used to pay their employees and on and on. The money kind of sticks around the state depending on who got paid when.”
The growth in deposits is not specific to Mississippi. It has been a national phenomenon. It has been a talking point of the industry since the pandemic’s beginning, and Fellows says the national numbers are mirroring those in Mississippi.
With deposit increases falling, Fellows said that even with inflation as it is, pandemic stimulus in the economy likely staved off panic.
“You hear (Federal Reserve Chairman Jerome Powell), and individual policymakers say that individual balance sheets are still really strong, even with inflation,” Fellows said. “So, we are in a better spot now than if there had been a rush on deposits like we were worried about early in the pandemic.
“In a way, it has been a good thing to have a buffer to absorb all of the shocks.”
Fellows says he expects the trend of deposit increases to fall but has no way to know how far that will go through June of 2023.