Correspondent Blog

Because of the option to add or remove deposit balances over time, deposit management is one of the more complicated endeavors in banking. Lending, by comparison, is largely a one dimensional supply vs. demand problem. Building better deposit performance is more complicated. Add a three month CD option for your customers and the duration of…

Deposit costs and liquidity remain a challenge for some community banks as competition for core funding remains intense.  The graph below compares the liquidity ratio for community banks (under $10B in assets) and banks over $100B in assets.  The average difference in liquidity is stark, but for many community banks the issue is translating to…

The average return on equity (ROE) for the banking industry declined to 11.10% in Q1/24 (a 23 percent decline in the last year). For banks under $10B in assets, ROE declined to 10.53% in Q1/24 (an 11% decline in the last year). The typical published analysis considers the industry in aggregate which conflates the challenges…

If you want to grab a material amount of new deposit balance, offer a 5.05% money market rate, post it all over Instagram, and sit back and watch the money roll in. This approach has many problems, the first of which is a negative return on your investment (ROI). You will also end up cannibalizing…

We have discussed the importance of bundling or packaging deposit account services to speed up customer choices, increase profitability, and enhance deposit performance. However, many banks still offer just two choices, whereas if they offered three, they would increase profitability. In this article, we examine how behavioral deposit pricing works and how to use it…

Maybe you saw Oppenheimer over the weekend, maybe it was Barbie, or perhaps you did the “Barbenheimer” thing and did both. Maybe you opted for Mission Impossible – Dead Reckoning, Part I. No matter your choice, there was a clear winner: Barbie. Film quality aside, there have been few movies in the history of the…

Community bank cost of funds is jumping up. As shown in the graph below, the net interest margin (NIM) for community banks declined 22bps in Q1’23.  Most of that NIM erosion is the result of a sharply higher cost of funding earning assets (COF). The question is – what will happen to community bank’s cost…

Last week (HERE), we looked at how deposit account tiering is used, some of the objectives that banks might employ, and the effectiveness of tiering in total. As discussed last week, many banks tier without objective, without data, and without supportive marketing, thus rendering the methodology worthless and possibly hurtful. We challenged several commonly held…

Adjusting pricing for deposit tiering according to account size is essentially a tradition in banking. A typical bank’s money market accounts often have six tiers ranging from $2,000 to $100,000. The question that always comes up is whether you have suitable tiers and the correct number of tiers. Are you using your tiers to drive…

Focusing on uninsured deposit performance is a hot topic among investors, analysts, and regulators. The concern is grounded in data as higher balance accounts are more interest rate and risk-sensitive than lower balance accounts. While every bank is now tracking the general metric, only a few banks monitor deposit performance in the category. That is…

Banking has now arrived at a speed that it cannot handle. While there have always been problems in banks’ asset-liability models (ALM) and liquidity stress test models, the current environment exacerbates this problem. Recent bank failures hurting public perceptions, the current market trends of higher rates, Quantitative Tightening, digital banking, social media, and a flight…

In the quest for deposits, one successful tactic at top-performing banks is to target the right types of customers. While desiring to bank everyone in your community is noble, it can be a poor use of resources. Some customers offer better returns because they use more banking services and have more deposit balances. Not to…