Rate Matching for Deposits

I see the logic in your questions but I think that you would agree the competition does set the price ---weather in the buying and selling of money as we do or some other goods and services. The question is what is the cost to raise the next dollar?  As mentioned the wholesale market is more expensive then the retail even at the higher prices levels locally. The competition for non maturing core deposits is strong with other players entering the market like brokerage firms --selling CD's and opening demand accounts. If you are running up against higher loan to deposit ratios then your left with the choice of tighter credit standards and higher pricing to reduce loan growth or pay up for the funding. We are a small institution with a small branch profile that leads to a good efficiency ratio.  So we feel like its worth it to pay up and add the marginal revenue to the bottom line.   Having said that-- like also mentioned not all deals are the same --higher dollar amounts will get the bid---  same work for more money. We realize this is " hot money" but we have it now and our competitor doesn't --this gives us the option to retain the account-- or let it go the next time it matures. If the Fed appears set on reducing the supply at least over the next few years -- this discussion will continue --no more cheap money --for now.

------------------------------
John Klute
Executive VP & CFO
People's Bank of Seneca
------------------------------
-------------------------------------------
Original Message:
Sent: 06-02-2018 22:46
From: Neil Stanley
Subject: Rate Matching for Deposits

With the growing stress on funding and rising interest rates retail deposit pricing becomes increasingly critical to financial performance.​  Recently someone posted a question in another industry forum about the "best practices" for deposit rate matching. I was surprised by the dialogue that followed where price matching appeared to be a fairly common practice today.  I am curious if among this group of bank executives there is acceptance of deposit rate matching as an endorsed practice for your retail deposits.  If you are matching competitor rates, how are retail deposit rates set, by whom, and how frequently do you update pricing?   How do you create effective governance and boundaries while you are letting the competition have so much influence on the pricing of your deposits?

------------------------------
Neil Stanley
President of Community Banking
TS Banking Group
Treynor, Iowa
------------------------------
​