Our non-interest business DDA accounts will continue to have appropriate fees and receive earnings credit rates as determined by the bank.
We are considering creation of separate/distinct account types for the new interest-bearing business DDA accounts. The new accounts can use the same fee structures as the existing non-interest bearing ones however no interest-bearing business DDA will be eligible for earnings credit. They will be charged fees appropriate for the level of transaction activity and treasury services activities. For these accounts interest will be paid instead of earnings credit from balances.
We plan to have a standard introductory interest rate on the new interest bearing business DDA. I propose an initial rate slightly below our earnings credit rate to be accrued on the low available balance for the statement period for any business account that requests interest bearing business DDA. This rate will be discretionary for the bank so that as the market rate of interest changes this rate can be adjusted at any time by the bank. For clients who do not keep more balances than necessary to offset their fees, it will generally not be advantageous for them to switch to interest bearing.
Commercial relationship managers will request financial information from applicants for higher rates of interest and have pricing discretion by using a rate incrementor on these interest bearing business DDA accounts up to an interest rate limit appropriate to the current market and set by Finance/ALCO. This will not be strictly governed by transaction volumes or deposit balances. Like the pricing of commercial lending, the final pricing of commercial DDA with interest will be based on the current and potential value of the relationship. The handoff will be very simple as the Universal Banker will introduce the client to the appropriate Commercial Relationship Manager; build the account; and increment the interest rate once a pricing decision is made by the Relationship Manager.
We need to expand our promotional materials to identify the potential for interest-bearing business DDA.
I welcome general and specific critique.
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Neil Stanley
President of Community Banking
TS Banking Group
Treynor, Iowa
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Original Message:
Sent: 02-03-2018 14:36
From: Neil Stanley
Subject: Interest on Business DDA
Would anyone like to share their bank's strategies today about interest bearing business demand deposit accounts? Since the repeal of the prohibition in 2011 interest rates are now at a level that we can expect questions from business owners. How are you dealing with these business account holders?
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Neil Stanley
President of Community Banking
TS Banking Group
Treynor, Iowa
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