Mississippi bank deposits could help tell the nation’s inflation story
September 22, 2022
With inflation still hovering nationally at its 40-year high, a trend in Mississippi could portend some good news.
Mississippi banks reported deposits for the year ended June 2022 at $4 billion more than in 2021. And while a $4 billion increase in deposits in one year is significant, the numbers are falling.
Gordon Fellows, the president of the Mississippi Bankers Association, says the influx of money into the banking system is a byproduct of federal funds as a result of the pandemic, which has fueled inflation across the country.
“With the pandemic, deposits have increased significantly over the past three years, so we’ve increased 20 billion since the start of the pandemic. That’s usually about 15 years of deposit growth crammed into three years.”
Gordon Fellows, Mississippi Bankers Association
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“With the pandemic, deposits have increased significantly over the past three years,” Fellows said. “So we’re up 20 billion since the start of the pandemic. That’s usually about 15 years of deposit 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 2021 was $7 billion higher, and this year it’s $4 billion higher.
“That speaks to the quality of the banks in the state that they have been able to absorb so much new deposit pressure and continue to care for customers as various government programs have gone through the check of payment or through the cities and counties and the state. ” funds also all sent as grants from the federal government,” Fellows said.
Recognizing the trend, Fellows said he believes growth in deposits is beginning to level off, which would be good from an inflationary standpoint.
“All this deposit growth has left people with more money to spend, which is part of what has fueled inflation,” Fellows said. “Think of recorded deposits as an early indicator. What the banks are telling me is that the dramatic growth is starting to level off, and that’s good.”
The other part is that the banks in Mississippi handled the flow of money without any problems. The state banks together hold more money than ever.
“In the community bank business model, you have to have deposits to fund loans,” Fellows said. “That’s what banks do. They take deposits and use those deposits to lend money. As deposits have increased through the pandemic process, people had more money to deposit.
“It has given banks more firepower to get money out,” he said. “If you think about the whole pandemic thing, deposits have risen at a breakneck pace.”
One thing that Fellows says is good about stimulus in this state is that if money comes to Mississippians, it tends to stay in Mississippi.
“We kind of have a built-in advantage in that regard,” he said. “We have a lot of people who really have a sense of community in the way they spend their money. Supporting small businesses is a really big thing in our state.
“A person can get a personal incentive check, which can go to paying employees. That money can go to a local restaurant, which was used to pay their employees, and so on. The money stays in the state, depending on who paid when .”
The growth of deposits is not specific to Mississippi. It has become a national phenomenon. It’s been an industry talking point since the start of the pandemic, and Fellows says the national numbers mirror those in Mississippi.
With deposit increases falling, Fellows said that even with inflation as it is, pandemic stimulus in the economy likely prevented panic.
“You hear (Federal Reserve Chairman Jerome Powell), and individual policymakers say that individual balance sheets are still very strong, even with inflation,” Fellows said. “So we are in a better place now than if there had been a rush on deposits that we were concerned about early on in the pandemic.
“In a way it was a good thing to have a buffer to absorb all the shocks.”
Fellows says he expects the trend of deposit increases to decline, but has no way of knowing how far that will go until June 2023.