Ohio banks, including Fifth Third, hold billions in uninsured deposits. Are you protected?

Ohio banks are holding billions of dollars of deposits that aren't covered by federal insurance.

Just by themselves Ohio's three biggest banks − Columbus-based Huntington Bancshares, Cleveland-based KeyBank and Cincinnati-based Fifth Third Bank − collectively have nearly $200 billion worth of deposits not insured by the Federal Deposit Insurance Corp. at the end of 2022, according to regulatory filings.

Those banks have plenty of company from other financial institutions, big and small.

News: Fifth Third, other Greater Cincinnati bank stocks tumble in wake of Silicon Valley Bank collapse

JPMorgan Chase & Co., the largest private employer in Columbus and one of the biggest banks in the world, has nearly $1.4 trillion in uninsured deposits and Pittsburgh-based PNC Bank, $200 billion.

Newark-based Park National Bank has $2.4 billion in such deposits, about 28% of all of the bank's deposits, regulatory filings show.

What's happening with uninsured deposits?

The issue of uninsured deposits has become significant after the collapse of Silicon Valley Bank in California and New York-based Signature Bank caused by an old-fashioned bank run in which depositors quickly pulled their money from the banks out of solvency fears. Of Silicon Valley Bank's deposits, 88% were uninsured as were 90% of Signature's deposits.

In the case of both banks, the FDIC has said it will cover all the uninsured losses.

But there are big differences between Silicon Valley Bank and Signature, and the banks that operate in Ohio. The percentage of uninsured deposits is much smaller − Huntington's share of uninsured deposits is 33%, Fifth Third's 42%, and Key, 46% − and the banks deposits are much more diverse.

About 43% of all bank deposits were uninsured as of Dec. 31, according to FDIC data.

The FDIC charges banks a fee and uses that money to cover insured losses in the event of a bank failure. As of Dec. 31, the Deposit Insurance Fund held $128.2 billion, or 1.27% of all insured deposits.

News: Regulators tap former Fifth Third CEO to run collapsed Signature Bank

Silicon Valley's deposits, for example, were largely dependent on the tech heavy, startup industry in the San Francisco area; Signature's deposits became more dependent on the volatile crypto industry in recent years.

"Silicon Valley Bank took a leap off the high dive and didn't make sure there was water in the pool," said Greg McBride, chief financial analyst for the financial website Bankrate.com.

Besides being more diverse, Ohio banks since the financial crisis in 2008-09 are better capitalized, said Michael Adelman, president and CEO of the Ohio Bankers League, the trade association for the state's banks.

There have been a couple of situations where customers have pulled money from their banks, but, if anything, the state's banks seem to be adding deposits, he said.

"You're safe and sound. We know you," Adelman said customers are telling banks. "I took that as very encouraging."

Is my money safe?

For consumers with up to $250,000 at any bank covered by the FDIC their money is safe. Beyond that, a person's cash is at risk should the bank be taken over by regulators.

"If you’re deposits are fully covered by deposit insurance, you can go about your day," McBride said. "You don’t have to worry about the safety of your money.’’

McBride said it's wrong to assume that since the FDIC has come to the rescue of customers at Silicon Valley and Signature that it will bail out all customers with deposits of more than $250,000 at any insolvent bank.

"Having uninsured deposits in the bank is not a risk you’re being compensated for," McBride said.

Only a small percentage of consumers have more than that amount of money in a bank, and those consumers can take steps to make sure it's protected, such as having multiple accounts with the same bank or spreading the money among multiple banks.

For businesses, it's a different story. They may keep large amounts of cash in a one particular bank to handle payroll and to pay vendors. Or banks may require companies that they loan money to keep all of their money at the bank as a provision of the loan.

Bank failures are rare in Ohio, and most banks receive a four- or five-star rating from Bauer Financial, an independent bank research firm.

Bauer rates banks from zero to five stars, with five being the best. It recommends banks with four or five stars.

On its most recent report, Fifth Third, Huntington and Chase received five stars, and Key and Park received four stars. No bank received fewer than three stars.

Ohio's big banks say deposits are safe

Ohio's big banks say they're well protected with a diversified deposit base that is positioned to withstand different economic environments.

“Huntington Bank is a financially sound, highly diversified consumer and commercial bank. We have over three million consumer checking households with peer-leading insured deposits and a commercial deposit portfolio with no outsized concentrations by sector or customer," the bank said in a statement. "The strength, stability and regulatory profile of Huntington should provide great comfort to our clients, and investors alike.”

"These are the types of environments we have been preparing for through years of positioning our balance sheet positively on credit, liquidity and rate risk management," Fifth Third said in a statement. " Our first and most important job is to be of service to our customers. As we have for 165 years, we will provide sound advice and help to existing and prospective customers who are looking for a strong and stable bank."

Key said it has not seen anything unusual in terms of deposit flows and has actually welcomed new clients.

“Key is a nearly 200-year-old financial institution with safe, sound and strong fundamentals.  While the events of the last few days have been disconcerting, it’s important to note that they are limited to small number of niche banks with unique, highly concentrated financial profiles,” Chris Gorman, the bank's chairman and CEO, said in a statement. “KeyBank, as well as other regional banks, are in a much different, more diversified and stronger financial position. Despite the recent events in our industry, KeyBank is well positioned to continue supporting all our clients with a full range of financing options while maintaining our moderate risk profile and delivering value to our shareholders.”

mawilliams@dispatch.com

@BizMarkWilliams

Uninsured bank deposits as of Dec. 31, 2022

• Huntington Bancshares: $142.1 billion total deposits, 33% uninsured

• Fifth Third Bank: $163.7 billion total deposits, 42% uninsured

• KeyBank: $146.9 billion total deposits, 46% uninsured

• Park National Bank: $8.5 billion total deposits, 28% uninsured

• PNC Bank: $436.3 billion total deposits, 46% uninsured

• JPMorgan Chase & Co.: $2.3 trillion total deposits, 59% uninsured

Source: regulatory filings, Dispatch research

This article originally appeared on Cincinnati Enquirer: Ohio banks hold billions in uninsured deposits. Does that matter?