Bank CEOs Most Pressing Issues: Hear From the Experts

Imagine stepping into the breach to moderate a CEO panel on the burning issues keeping bankers awake—intrigued yet? I had my hunches about their top concerns, but I wanted greater precision. So, we took action: the trade association polled its membership, while I tapped our content email list. Despite the challenge of coaxing responses, we crafted a single multiple-choice question, letting respondents pick their top three issues. The results? They’re revealed below—surprised?

Forget my lengthy take on the top four burning issues—Funding Strategies, Personnel Recruitment and Development, Customer Experience, and AI/Fintech Integration! Instead, I teamed up with industry insiders and experts to set the stage before turning the tables on attendees to have their roundtable takes.

Before I summarize our expert commentary on each hot topic, first meet our subject experts (SMEs):

Summary of SME Remarks

• Bank Funding Strategies and Demographic Shifts: Neil Stanley discussed evolving bank funding strategies, the impact of changing depositor demographics, and actionable approaches for attracting and retaining deposits in a competitive environment, with follow-up questions on engaging younger depositors.

• Evolving Funding Strategies: Neil explained that traditional distinctions between savers and investors have blurred, with more people viewing themselves as investors due to increased access to investment products and technology. He emphasized that banks now compete directly with U.S. Treasury products and money market accounts, and must adapt by offering more than just low interest rates to attract deposits.
• Challenges with Traditional Approaches: Neil highlighted that relying on static rate sheets, frequent CD specials, and ad hoc pricing is outdated. He recommended banks move towards hybrid deposit products, such as companion accounts, and implement a sequential sales process similar to commercial lending to better serve different customer segments: sleepers, the curious, and shoppers.
• Hybrid Deposit Products and Data Insights: Neil advised banks to introduce companion accounts, where new CD customers qualify for high-yield savings accounts, to attract both shoppers and curious customers. He also suggested leveraging data insights to identify single-service CD customers and broaden their relationships by offering additional products.
• Addressing Aging Depositor Base: In response a question about the increasing average age of depositors, Neil noted that this trend reflects broader societal aging and the wealth concentration among baby boomers. He recommended not neglecting older customers, but also suggested banks offer efficient, reward-based checking programs and digital wallet integration to appeal to younger generations who value convenience and efficiency over traditional community banking.

• Personnel Recruitment and Development in Community Banking: Amy Vieney from People's Security Bank and Trust addressed the challenges of talent recruitment and development in community banks, focusing on succession planning, generational differences, and the balance between hiring externally and developing internal talent, with the audience prompting a discussion on the pros and cons of each approach.

• Succession Planning and Leadership Development: Amy emphasized the critical need for intentional staff and leadership development, noting that many community banks face a talent gap as long-tenured employees near retirement and younger generations have different workplace expectations. She described her bank's implementation of structured leadership development programs, including partnerships with third parties to build a pipeline of future leaders.
• Generational Workforce Challenges: Amy discussed the conflicting dynamics between a shrinking baby boomer workforce and high turnover among Gen Z and Millennials. She highlighted the importance of adapting leadership and development strategies to meet the expectations of newer generations, who prioritize flexibility, technology, and career growth.
• Balancing Internal Development and External Hiring: Prompted by a question, Amy outlined the advantages of hiring externally, such as bringing in fresh perspectives and filling urgent skill gaps, but noted higher costs and potential cultural fit issues. She contrasted this with internal development, which fosters cultural continuity and long-term loyalty but requires significant resources and time to build effective programs.
• Strategic Importance of Development Programs: Amy stressed that leadership development and succession planning should be viewed as business strategies rather than HR initiatives. She argued that investing in people secures institutional culture, strengthens customer loyalty, and ensures long-term organizational stability, especially in the face of industry consolidation and technological change.

• Enhancing Customer Experience in Community Banks: Tara Brady from Provident Bank explored the complexities of delivering exceptional customer experiences in community banking, focusing on generational expectations, the impact of technology and fraud, and the importance of employee empowerment, with further discussion around relevant KPIs and strategies.

• Changing Customer Expectations: Tara described how customers now expect immediate, accurate, and consistent service, influenced by social media, AI, and the prevalence of fraud. She noted that younger generations are not necessarily attracted by traditional banking rewards or branch access, but instead seek financial education and security.
• Financial Education and Early Engagement: Tara shared findings from internal and market studies showing that younger customers often lack financial education and rely on parents for guidance. She emphasized the need for banks to engage with potential customers earlier, ideally before college, and to provide accessible educational resources for both students and parents.
• Fraud and Trust Issues: Tara highlighted the growing challenge of fraud, with customers frequently unsure about whom to trust. She stressed the importance of proactive fraud education and support, as well as clear communication about protections like FDIC insurance, to build trust with both younger and older customers.
• Employee Empowerment and Customer Support: Tara advocated for empowering employees with tools and training to address the needs of diverse customer segments, particularly younger customers who value being heard and supported. She recommended active listening, tailored guidance, and upfront fraud conversations as key strategies.
• Measuring Customer Experience: In response to an audience question, Tara recommended using customer effort score, customer lifetime loyalty, and wallet share as key performance indicators, rather than relying solely on Net Promoter Score (NPS), to more accurately assess and improve the customer experience.

• Fintech and Artificial Intelligence Integration in Banking: Shea Gabrielleschi from Hartman Executive Advisors, provided an overview of the current state and best practices for integrating fintech and AI in banking, addressing operational efficiencies, data strategy, security concerns, and the importance of proactive adoption, with questions from attendees on AI tools and data privacy.

• AI Adoption and Strategic Policy: Shea explained that AI is already present in banks, whether formally adopted or not, and advised against trying to ban or ignore it. Instead, banks should develop policies aligned with strategic goals and governance, and begin structured adoption to avoid security risks from unsanctioned use.
• Operational Efficiency and Early Use Cases: Shea noted that most banks are focusing initial AI investments on operational efficiency, such as automating back-office tasks, drafting documents, and searching internal files. Tools like Microsoft Copilot are being piloted to safely introduce large language models within secure environments.
• Data Strategy and Vendor Integration: Shea emphasized the importance of banks taking ownership of their data to enable effective integration with fintech and AI tools. He advised banks to negotiate for better data access in core platform contracts and to organize data for secure, efficient use by third-party vendors.
• Security and Privacy in AI Tools: In response to audience questions, Shea clarified that tools like Microsoft Copilot keep data within the bank's secure environment and do not use customer inputs to train global models. He contrasted this with public AI models and recommended using business-grade, secure AI solutions.
• Leadership and Ongoing Learning: Shea encouraged bank leaders to personally experiment with AI tools to build familiarity and to foster a collaborative approach to AI adoption. He stressed that no one is an expert yet, and that ongoing peer learning and adaptation are essential as the technology and regulatory landscape evolve.

Reader to-do's:

• Funding Strategy Product Enhancement: Evaluate and consider implementing a hybrid deposit product (companion account) to attract new money and broaden relationships with single-service CD customers.
• Leadership Development Program: Engage with outside providers to launch structured leadership development journeys for new leaders, aspiring leaders, and high potentials within the organization.
• Customer Education Initiatives: Develop and offer educational resources and webinars targeted at parents of students and students to address gaps in financial education and support early engagement with banking services.
• AI and Data Strategy: Review and update core platform contracts to ensure greater ownership and accessibility of bank data for effective integration with AI and fintech tools.

A big thank you to our SMEs and I hope you can benefit from the discussions our bank CEOs enjoyed while discussing their and our most pressing issues.

~ Jeff

The Valuable Bank Customer

Over the past two weeks I taught at two separate banking schools. What value do I get from teaching at banking schools? Learning. So often I am trapped with bank executives that carry career-long paradigms with them. Some are beneficial, such as knowing when you should say no to a loan, even one that meets your Debt Service Coverage Ratio (DSCR) hurdle. Some paradigms, however, become outdated because of our changing industry. 

Such is the case for our funding strategy paradigms.

But bankers that are newer to the industry carry no such paradigms. And I was interested to hear how their bank is navigating the challenging deposit environment when they compete with names such as Capital One and Sofi Bank, both of which have much higher-yielding assets than the local community bank and therefore can pay more for deposits.   

I wrote about this extensively in my book, Squared Away-How Can Bankers Succeed as Economic First Responders. Specifically in Chapter 10, The Hot Rate Stalemate. In that chapter, I distinguished between Store of Value versus Accumulation Accounts. One was price sensitive (Accumulation), the other not so much. They key is to have a blend that will deliver a superior cost of deposits. 

This is where the back and forth with students was valuable. The bankers who specifically dealt with deposit customers, either retail or business, discussed the challenges of offering so much less than the Capital One's of the world. Here is an example of what I wrote on the board:

Question #1: What is the value of a relationship? 

Does a customer value the relationship manager and the bank, the branch location, the customer experience, the work you do in the customer's community, and the fact that you lend the vast majority of deposit dollars into the customer's neighbor's home or the local business? 

I think they would, if it is well-positioned, visible, and meaningful to your customer and his/her community. The community bank could do a far better job at positioning the value of your bank beyond price.  Your customers make premium pricing decisions almost daily. Why not for you? 

I don't think, however, that the difference a customer will pay to bank with you versus a competitor is significant. The example above shows a 50 basis points rate difference between Capital One and you, or $500 annually for an account with an average balance of $100,000.  That puts the value of your relationship at 50 bps, which is good except that the average direct operating expenses to average deposits in the hundreds of branches that my firm measures is 99 bps, an expense a branchless bank does not have. Somewhat offsetting this disparity is the average of 35 bps of fee income to average deposits in branches.

Question #2: Is the customer price sensitive in his or her specific account? 

The answer to this question is rarely known but should be discovered during the account opening process (know your customer should be more than a compliance exercise). If not known during the account opening process, perhaps technology could answer this question based on how it is used, or some good old gumshoe investigation by the relationship manager. 

In the above example, Capital One hypothetically thinks the customer is price sensitive in every account. We intuitively know this to be untrue. I have no idea what I'm earning in my checking account or the account that I use to accumulate money for taxes and my next vacation. But if the Money Market Account was my family emergency fund, I would likely want a competitive rate. Community banks should know what's what in terms of what an account is for and what the customer's price sensitivity is.

The above customer collects 2.47% in interest from their community bank. Assume this customer pays 35 bps of fees, and the net cost to the bank is 2.12%. The transfer price on this deposit relationship, assuming a four-year duration is 3.85%, driving net revenue of 1.73% (3.85%-2.12%). This would be a much more profitable relationship than just getting the $100,000 Money Market Account at a 10 bps spread (3.85%-3.75%) because that is what Capital One is paying. 

This math should drive funding strategies into the future. We can no longer rely on Rip Van Winkle customers accepting 250 bps less than branchless banks because the customer is not paying attention to what you are paying them in their price-sensitive accounts. It erodes trust, is easier to uncover, and easy to switch to a competitor. There is a reason why FDIC-insured banks lost $900 billion in deposits during the last Fed tightening and money market mutual funds gained $900 billion.

Our cost of funds should be managed by mix of funds. 

Few of my banking students knew this math. Shouldn't all of them know it? For my students, they know it now.

 

~ Jeff

Online Account Opening

Online account opening remains the wild west for most community banks. In so many strategy sessions, I hear from bankers that it is a bust. They get more fraudsters than customers.

This was the background as I attended Bank Director's Acquire or Be Acquired (AOBA) conference. And naturally I was keenly interested in how to solve this problem, or even diagnose what exactly is the problem, for community banks and online deposit account opening, either retail or business. 

Narmi, a key player in this space, had a presentation titled Leveraging Digital to Drive Core Deposits, and had two partner banks, Berkshire Bank and Community Savings on the stage with them. Berkshire Bank, a $12.3 billion in asset bank based in Pittsfield, Massachusetts, launched Berkshire One for online customers. 

It boasts of account opening in less than two minutes. Otherwise, it has features such as a one-time payment of $200 to open a checking account, and an intriguing APY for opening a money market account. The small print disclosures look pretty much like all such disclosures. Oh, and the Boston Celtics Derrick White is a brand ambassador. We measure product profitability for our clients and the average annualized operating cost per retail interest-bearing checking account was $448 in the third quarter 2024. I suppose it would be more for Berkshire having hired Derrick White.

More impressive than Berkshire's two-minute opening claim was Community Savings of Caldwell, Ohio. As a Notre Dame fan it pains me to type Ohio. And I just did it twice. Community Savings impressed me more for their size and therefore resources to execute on online account opening than the much larger Berkshire. The bank, although established in 1885, was only $270 million in total assets at year-end 2024. And their growth did not come linearly. They were only $68 million in 2021. 

According to the AOBA presentation, Community Savings, once they turned on online account opening using the Narmi solution, acquired $2.5 million in new core deposits in the first month, and $22 million in the first 120 days. Average deposit size per account, according to the presentation, was $57,000. Deposits, which stood at $53 million in 2021 now stand at $198 million. Cost of funds did rise from 78 basis points in 2023 to 3.13% in 2024. So it did come at a cost. Community Savings had a >100% loan-to-deposit ratio. Banks that needed the money tended to pay more for the money. Makes sense.

Online deposit account opening is more prominent today than it was yesterday and will be even more so tomorrow as today. First Internet Bank in Indiana was opened in 1998. It now has $5.7 billion in total assets. Grasshopper Bank, a Narmi customer, opens hundreds of business checking accounts per month online. You read that right. Hundreds. Per month. Business accounts. Grasshopper has 96 full-time equivalent (FTE) employees. Community Savings launched its online account opening tool in 49 days. They have 59 FTEs. 

According to Susan Bui Bergen, CEO of Infinite Potentiality and 30+ year bank marketer for banks $1 billion - $30 billion in total assets, "The shift to online account opening represents a significant opportunity for community banks to enhance their reach and operational effectiveness."

Totally agree. Because many banks are struggling today with their funding. Funding strategies should be perpetual and strategic. If your bank is flush with liquidity you should encourage your relationship officers and marketing personnel to keep it rolling. Turning the spigot on and off is an ineffective funding strategy, in my opinion, except for wholesale approaches to fill gaps. When is a good time to deepen depositor relationships and grow core deposits? Always.

I don't believe branching is dead. Neither does Jamie Dimon, so I'm in good company. But I do believe that each location, be it physical or virtual, should deliver profit to the bank. And banks have struggled with their virtual branch. 

According to Mantl, a Narmi competitor, low-performing banks in online account opening experience a 30% submission rate, meaning if 100 people start an online checking application only 30 complete it. And then experience a 30% approval rate of the 30 that completed the application. Meaning, out of 100 people who started an online deposit account application, only 10 get opened and funded. 

High-performing banks in online account opening had a 55% submission rate and a 65% approval rate. Meaning out of our hypothetical 100 people, 36 get opened and funded. I'm not sure "initial funding" is a good stat because it would make sense that new customers would seed a new account with maybe $100 until they moved everything over. Online account balances are notoriously lower than in-branch opened accounts, but becoming less so. 

According to Bergen, "To succeed, it's vital to meet customer expectations by making the process straightforward, intuitive, and secure. By focusing on user-friendly interfaces and strong fraud prevention, banks can achieve continuous improvement and truly benefit from digital advancements. Those who excel will set themselves apart and flourish in the competitive landscape."

The challenge remains core deposit growth at a reasonable cost. Many banks, like Berkshire and Community Savings, tend to offer higher online rates to encourage people to move. The branch or a relationship with a banker likely does not exist, although I wouldn't discount that customers who are in towns where you have branches will open accounts online. So a branch could play a factor although the prospect does not have to enter it.

Here is the profit performance of retail interest-checking for all banks that we measure this for on an outsourced basis.

Let's say that an online account experiences half the average balance of a traditional account. In this case, $7,255. Total income is 4.14% in the 3Q24. So revenue for our hypothetical online account is ($7,255 x 4.14%) just over $300. Not enough to cover the annualized cost per account (for acquisition and maintenance) of $448. Adding to the challenge is that the traditional account represented above is only paying 35 bps interest expense. So if you must juice that number to incentivize that person sitting at home to open an account, the total income of 4.14% will go down. 

Online account opening solutions providers would likely argue that acquisition and maintenance costs are lower for the online account opener. Perhaps true. Then, as your online branch grows and becomes a greater proportion of all accounts opened, that annualized cost per account should also go down. Banks should build this discipline into their accountabilities.

Flipping on the online account opening switch does not end the project. It has only just begun! There must be marketing, internal education, and continuous improvement to make sure you are not blocking legitimate prospects out by having overly conservative triggers in your account opening solution. This happens when a bank's risk appetite for fraud is zero. They tighten the screws so tight that their local minister can't get an account. And the bank becomes low performing as described above based on Mantl's numbers.

Online account opening is here to stay. The tools have evolved to surpass ease of use of our in-branch account opening tools. In fact, I don't know why Fiserv users still use BPM to open accounts. Use the online account opening tool. According to Berkshire Bank, it takes two minutes!

But as you make progress in your online account opening journey, measure the profitability of those products and that virtual branch. Just like you should do with your physical branch. How else would you know if it is successful?

~ Jeff

Top 3 Jeff4Banks.com Blog Posts of 2023

I am always interested in learning what bankers and those that serve them are interested in reading. And since I have been writing industry articles and insights since 2010, clicks to my blog are a good indicator. Over the past two years I have been re-posting articles written here on LinkedIn. Usually a number of days after writing it. Prior to that I would put one or two paragraphs of the article on LinkedIn, followed by a link to Jeff4Banks.com. The new way lowers traffic to this site. But the number of clicks is directionally correct on what most interests readers.

The below top three are not necessarily from this year. In fact, the most read of 2023 was from 2013, ten years prior. Go figure?

Here were the top three most read articles of 2023:

Loan Pricing: Must It Be So Complicated

URL: Jeff For Banks: Loan Pricing: Must It Be So Complicated? (jeff4banks.com)

Publish date: September 6, 2013

Amazing that a 10-year old post rose to the top of the list. It is difficult for me to understand what resurrects an old article. Perhaps a web browser search. Perhaps a banker forwarded it around to their colleagues. Or perhaps there were a lot of bankers trying to improve loan pricing at their institution.

No matter the how, I'm pleased with the interest in simplifying loan pricing to account for the market, risk, and profitability of the individual loan. The next evolution of creating a culture of loan pricing discipline is to measure lender profitability by adding the spread of all the loans and deposits in their book, and assessing the cost per account times number of accounts. Then hold the head of commercial lending accountable for the continuous profit improvement of commercial lending products and the commercial lending line of business. That would be bottom-up accountability, which would inevitably lead to a more profitable financial institution.

One can dream.

Bankers: Please End This Practice. Or It Will End You.

URL: Jeff For Banks: Bankers: Please End This Practice. Or It Will End You. (jeff4banks.com)

Publish date: May 21, 2023

Prior to the Fed's quantitative tightening began in the first quarter of 2022 I was warning bankers that "a business model based on the sleepiness of your depositors is unsustainable." Before you accuse me of being Captain Obvious, know that I said this in 2018 during the prior Fed tightening cycle and before the pandemic. I felt so strongly about it that there is a chapter in my book about it, which I wrote in 2021. Again, prior to the 2022 Fed tightening. 

Does it make me happy that so many bankers read this article? Yes. Will it make me happier if bankers act on the recommendations or formulate their own funding strategies? Yes times two. 

Predicting the Next Banking Crisis Is a Fool's Game. Not Learning From the Last One: Equally Foolish

URL: Jeff For Banks: Predicting the Next Banking Crisis Is a Fool’s Game. Not Learning From the Last One: Equally Foolish (jeff4banks.com)

Publish date: June 2, 2023

This was an interesting top read as it was the speech I delivered to the general session of the New Jersey Bankers' Association annual convention at The Breakers in West Palm Beach, Florida. I might have looked stunned in the klieglights while delivering it but truth be told I saw my hotel room bill before delivering it. 

In my remarks I summarized lessons learned from each crisis since the S&L crisis of the late 1980's. And how each crisis was different than the last. There were themes worth noting, however. Credit risk, interest rate risk, and concentration risk have been part of every crisis. As an example, take the tech meltdown of 2001. This was a virtual non-event for the vast majority of banks because they had very low exposure to the tech sector. They were not concentrated in it. Fast forward to Silicon Valley Bank's exposure to startups funded by VC or P/E firms. That concentration cost them the bank.

There you have it. First a mea culpa: last year I only wrote 20 articles, far fewer than "content managers" tell me I need to keep the interest of readers. I write and research these articles myself (mostly). And they are time consuming, and I found myself with less time last year. I will try to do better for readers.

Thank you so much for reading my content. I welcome your questions, challenges, and even kudos. I love the kudos but I have thick enough skin to know my readers' challenges are to sharpen my opinions and help to move our industry forward.

~ Jeff

3 Ideas for Your Deposit Strategy

The 2022-23 Fed monetary tightening caused disruption to our depositor base. We either lost deposits to Treasuries, money market mutual funds, or disintermediated into higher cost deposits within our bank. In this video short, I suggest three ideas to improve your deposit strategy as follows:

1. Identify "dead money" in your depositor base and pro-actively deepen your relationship with them.

2. Create "companion accounts", as described by our friend Neil Stanley from The CorePoint, to lure the money we've lost back into our bank.

3. Manage the mix. Determine which accounts are "accumulation" versus "store of value."

Listen to the three-and-a-half-minute video for greater context. Or contact me at jmarsico@kafafiangroup.com or 717.468.3208. 

What are your ideas for a deposit strategy? 

Bankers: Please End This Practice. Or It Will End You.

I recently spoke at a banking conference where I challenged bankers to end the practice of relying on sleepy depositors that don't demand top rate. You know, the practice of allowing bankers to raise deposit rates only if the customer calls and complains.

When I challenged bankers that they can't claim to be trusted advisors to their customers if they engage in this practice, I got push back. Push back because most bankers in the room likely practiced it. I heard, "what would you like us to do?" or "where were you with this advice in 2017 or 2018?"

To the second question, my response was "it's in my book." And it is. Chapter 10: The Hot Rate Stalemate, where I wrote "paying 1/3 the market rate on a customer's savings, and then bragging about it in your investor presentations, can't be a way to strengthen relationships and increase the amount of business you do with them." 

But that book, Squared Away: How Can Bankers Succeed as Economic First Responders was written in 2021. And it was hardly a best seller. Actually, it did rise to #1 in Banks and Banking on Amazon for one week. Aside from that, not many people have it on their bookshelf. Aside from my family. Well, at least they say they'll read it... someday.

However, the reference in the book was to a blog post written in 2018, titled Hot Rates, Swipe Left. Also in 2018, in a blog post titled A Time of Reckoning for Your Bank's Core Deposits, I wrote "a business model based on the sleepiness of your depositors is unsustainable." I encourage you to read both posts if wondering question number two, what would you like us to do?

What this tells me is not that I haven't been in front of this issue, but that nobody reads what I write or hears me when I speak. Or that the practice is so ingrained in bankers that we need to pass the generational torch to put a silver stake in it.

If you continue to read this article, you must be interested in breaking from the time-honored tradition of screwing your customers that don't pay attention to the rate you are paying them. Maybe "screwing your customers" is harsh. But what would you call paying depositors significantly below the market because they are not paying attention to what you are doing? Sometimes, the truth hurts. But doesn't make it an untruth.

What To Do

But there are practical considerations. Say you have $500 million in a money market product. Let's call it product 360, as representative for a product code on your core system. If you abandon the practice of making rate adjustments only for those that realize you are paying them materially under market rates and call you to complain, you would reprice $500 million in deposits! Disaster, right?

Let's take my bank, who I would normally leave anonymous but since I'm only attributing fact, I'll talk frankly. Truist was paying me .01% on my money market. When I finally woke up and realized it, Fed Funds was five percent. When I called, they said they would raise it to 3.5%. When I told the branch banker that I didn't appreciate being taken advantage of because I wasn't babysitting my money she said, "sorry." Good thing they inserted the "i" in their name as a hedge.

But if a bank increased product 360 by 349 basis points to $500 million in balances, this would add $17.5 million of annual interest expense. Even if this hypothetical bank could increase their new production loan yields by 349 basis points, it would not keep up with the $17.5 million because yield on loans would increase slowly. 

That money market account was only one of many deposit accounts I have at the bank. The others, including my checking account, I was not too price sensitive. One was for storing money for future home renovations, another saving for a future automobile, a third was a wash account for business traveling expenses. 

If when opening accounts, the bank learned the purpose of the account, and classified accordingly, they would be able to hold steady on pricing, at least not increase rates to market for those accounts I considered "store of value" accounts. These accounts are meant for accessibility, safety, and frictionless transaction processing. Maybe their product codes would be 320 and 330. So as rates rise, pricing committees know they don't have to keep pace with the market. Maybe their names would be Fort Knox Savings, where your deposits are insured up to the FDIC limit and beyond because of reciprocal deposit features, and is easily accessible via mobile, online, and your local branch.

But for those I want to keep pace with the market, you would reprice without having me check the rate you are paying me, recognizing it is below market, and having me call to complain. I'm not saying you have to keep pace with the market. I do get FDIC insurance, and the benefit of the branch and possibly a person to call on the phone. That's worth something.

Your brand should also be worth something. So often in strategy sessions I hear that a bank's brand is a strength. And sometimes this assertion is because of third party customer and non-customer surveys. But most times it's a feeling. It should be more than that. I wrote about this in 2019 in a post titled, Bank Brand Value: Calculated!

For this tightening cycle, it is probably too late to change your deposit pricing strategy. The fault in the strategy can be easily diagnosed by the hockey stick increase in your cost of funds. In recent remarks to a group of bankers, I said "our lesson learned in this most recent crisis, in my opinion: don't let market rates get too far ahead of what you pay depositors, unless you think it's worth those two or three quarters of superior cost of funds to aggravate your depositors and force them to seek alternatives and lose trust in you."

But the solution requires you to segregate depositors interested in "store of value" or "accumulation" accounts. Something we have some work to do in order to successfully execute on.

What is your deposit strategy?

~ Jeff