Himalayan salt — with its distinctive pink hue — can be up to 20x more expensive than other varieties. Unsubstantiated claims of its health benefits have made it hugely popular worldwide, not only in cooking but also in serving dishes, decorative lamps, and the lining of spa walls! Himalayan salt is mined from deposits that accumulated between 600MM and 540MM years ago in the Punjab region of Pakistan. Just as Himalayan salt deposits took millions of years to form and hold value, community financial institutions (CFIs) must carefully cultivate their own “deposits” to ensure long-term stability, value, and growth.Industry Context: Disintermediation and Competitive DataRecent surveys show that 65% of US banks list growing deposits among their top three priorities, underscoring how deposit flows have become central to institutional success. In 2025, total US deposits stand at $1.84T, recovering from the decline after the April 2022 pandemic-induced peak of $1.81T. Despite the rebound, competition for deposits remains fierce, driven by interest rate volatility, digital banks luring customers with attractive offers, and increasingly rate-sensitive consumers who often shop around for better returns.Beyond Net Interest Margin: Real-World Profitability ExamplesA Bancography analysis in Philadelphia highlights that CFIs can match or outperform big banks in deposit revenue per branch, largely by maintaining lower funding costs. For example, $1B-asset First National Bank Trust Company of Newtown, with only $66MM in deposits per branch, has a cost of funds of just 21bp, generating $2.5MM in deposit revenue per branch — higher than many larger financial institutions. This demonstrates how focusing on funding costs, rather than just volume, can drive superior profitability — even for modestly sized banks.The Impact of Rate Cycles and Deposit MixWith the onset of declining interest rates, most deposit products (checking, savings, CDs) at CFIs reprice more slowly than loan products. This creates potential margin pressure as asset yields drop faster than funding costs adjust. The specific mix of deposit products (e.g., heavy CDs versus liquid checking) and the speed of rate change are primary factors influencing margin performance.Strategies for Deposit Management and Profitability
- Segment and Target Customers with Data
- Leverage analytics to segment customers by price sensitivity, stickiness, and lifetime net income. Age, education, and relationship history help predict value and elasticity.
- Tailor rate offerings and outreach for each segment, focusing resources on high-value, less rate-elastic groups.
- Focus on Small- and Medium-Sized Businesses (SMBs) for Deposit Growth
- According to Curinos, financial institutions spend about half as much to acquire small business deposits compared to consumer deposits, and small businesses typically maintain higher balances and value bundled personal service. Targeting SMBs with bundled offerings creates profitable and stable funding sources.
- Deepen Relationships Beyond Rates
- Reliance on rate can attract non-sticky customers. Providing intangible value — convenience, digital experience, and community reliability — builds loyalty and anchors long-term relationships.
- Optimize Funding Cost and Liquidity Risk
- The real challenge is finding the sweet spot between volume and profitability. Chasing volume at any cost erodes margins, while setting rates too low can risk liquidity and outflows. Use advanced analytics, like PCBB’s Profitability FIT™ tool, to monitor costs, simulate pricing changes, and balance margin discipline with growth.
- Build Culture and Education for Sustainable Profitability
- Many bankers see fragmented parts of deposit profitability. A shared tool and educational platform can bridge this gap, providing both seasoned leaders and newer employees with a holistic, disciplined view of all profitability levers.
Actionable Balance for 2025Deposit profitability is not simply about increasing volume or cutting costs — it’s about leveraging data-driven insights, targeting relationships with precision, managing repricing risks, and using holistic tools for education and performance. By integrating robust analytics and a culture focused on risk-adjusted profitability, CFIs are positioned to thrive and grow in today’s competitive deposit market.
