Regional banks in the United States recorded $135 million in loan prepayments during Q4 2025, nearly matching the $140 million prepaid across the first three quarters combined, according to Andrew Hibshman. The acceleration mirrors repositioning trends seen in European and Asian banking markets where depositors have increasingly moved funds in response to rate uncertainty.
Total deposits declined $21 million during the quarter, driven by a $27.1 million drop in specific categories, Hibshman reported. The outflows occurred as the US 10-year Treasury yield swung from -0.6 to +10 basis points within one week, triggering portfolio adjustments similar to behavior observed in UK gilt markets and German bund trading during recent volatility periods.
Time deposits fell $38 million—an 18% annualized decline—as banks reduced exposure to high-cost funding, according to Darleen Gillespie. The pattern echoes strategies employed by banks in Canada and Australia, where institutions have cut reliance on term deposits as central bank policy outlooks remain uncertain. US banks now face $800 million in CD maturities through Q2 2026, with weighted average rates creating repricing pressure, Michele Kawiecki noted.
The timing mismatch between accelerated prepayments and deposit volatility squeezed quarterly funding despite stable annual loan growth. Roughly 40% of the CD book reprices within six months, a concentration risk similar to challenges facing midsize lenders in Europe's higher-rate environment.
Peter Cahill emphasized the $135 million Q4 figure represented an anomaly compared to quarterly averages of $35-40 million earlier in 2025. The prepayment velocity suggests US borrowers anticipated refinancing opportunities or needed liquidity ahead of economic uncertainty—behavior consistent with global deleveraging trends in markets from Japan to the eurozone.
Regional banks must now manage $800 million in CD maturities while competing on deposit pricing to retain customers. The Q4 dynamics indicate US depositors are actively managing rate risk rather than maintaining static positions, a shift that aligns with global investor behavior as central banks worldwide navigate inflation targets and growth concerns.
Net interest margin compression is likely if banks raise CD rates to retain maturing deposits while loan yields decline from prepayments. The Q4 pattern shows heightened sensitivity to rate expectations rather than actual Federal Reserve moves, complicating liquidity forecasting for 2026 in a manner familiar to international peers facing similar policy ambiguity.
Sources:
1 Yahoo Finance, "First Bank Q4 Earnings Call Highlights" (January 27, 2026)
2 Yahoo Finance, "First Bank (FRBA) Q1 2025 Earnings Call Transcript" (January 26, 2026)
3 Yahoo Finance, "First Merchants Corp (FRME) Q4 2025 Earnings Call Highlights: Record Growth and Strategic Expansion" (January 27, 2026)
4 Yahoo Finance, "First Merchants Q4 Earnings Call Highlights" (January 27, 2026)
5 Nasdaq, "The Nasdaq Is on the Verge of a Correction. 4 Things Investors Need To Remember" (March 23, 2026)