Insured Brokered CDs to Accelerate 140% to $960 Billion by Year-End 2021

The Value of Brokered CDs per Institution is Growing

The value of brokered CDs per financial institution grew exponentially over the last two decades, from an average of $65 million in 1998 to $239 million in the 3rd quarter of 2018. This growth was due to an increase in government insured levels to $250K, bank mergers, and strong growth in loans for those core banks issuing time deposits.

Each quarter IDCFP divides the total reported brokered CDs less than $250K by the total number of financial institutions issuing these CDs to determine the average value of insured brokered CDs per financial institution. In the 4th quarter of 2008, the average value peaked at $140 million, and then fell to $129 million in 2009 during the banking crisis. Since then, the value per institution has risen, reaching a record average of $238.6 million in the 3rd quarter of 2018. The increase in value of brokered CDs per institution was $9 million per quarter over the past year. IDCFP forecasts this dollar growth will be $13.5 million per institution per quarter over the next three years.

The Number of Financial Institutions Issuing Brokered CDs is Rising

The number of institutions issuing brokered CDs has also grown at an accelerated rate in recent quarters. Banks and savings institutions rose from a plateau of 1,300 in 2017 and are estimated to reach 1,540 by year-end 2018. Credit unions issuing brokered CDs also accelerated from 2 in 2015 to a plateau of 29 in 2017 and are expected to reach 124 by year-end 2018.

The Forecast for Brokered CDs to Accelerate

IDCFP forecasts the number of banks, thrifts and credit unions with outstanding brokered CDs to be 1,664 at the end of the 4th quarter of 2018. As tax cuts, deregulation, infrastructure spending, and other government initiatives drive increased spending, GDP growth is expected to expand 2.5% to 3% a year. This, in turn, will create bank lending and cause an increased number of financial institutions to issue more CDs. Currently, outstanding brokered CDs currently account for 24.8% of time deposits, up from 14.7% in the 4th quarter of 2008. This percentage of outstanding brokered CDs to time deposits has grown consistently each quarter from 2008 to 2018 and is projected to reach 35% by year-end 2021.

IDCFP estimates the average of brokered CDs less than $250,000 per issuing financial institution will rise about $13.5 million a quarter and reach $400 million by 2021 and the number of financial institutions issuing brokered CDs could expand from 1,664 to 2,400. Based on this forecast, the estimate of DTC brokered CDs outstanding will increase 140% from the $400 billion balance at year-end 2018, to reach to $960 billion by year-end 2021, which is an average increase of $47 billion per quarter (see chart below).

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John E. Rickmeier, CFA, President,

Robin Rickmeier, Marketing Director