Deposit Momentum is Back. Future Growth Requires Careful Nurturing

Rebuilding Momentum: A Return to Core Stability

By late 2023 and into early 2025, as rate volatility eased and consumer confidence improved, banks saw renewed momentum. FDIC’s Quarterly Banking Profile showed three consecutive quarters of deposit gains, with brokered deposits declining while core deposits rose.

Visbanking’s analysis mirrors this trend: in Q1 2025 alone, core deposits increased while banks reduced reliance on expensive wholesale funding. This reflects not only market normalization but also deliberate pricing and portfolio strategies executed through ALCO (Asset-Liability Committee) governance across many institutions.

ALCO committees typically meet monthly or quarterly to assess balance sheet dynamics, rate scenarios, and funding costs. These forums enable banks to gradually adjust deposit pricing through tiered product offerings, targeted promotional campaigns, and relationship-based incentives.

ALCO meetings typically model multiple rate scenarios — parallel shifts, steepeners, or flatteners — alongside assumptions about deposit mix shifts and early withdrawal behavior. For many banks, the most powerful tools in deposit repricing are tiered-rate structures, relationship incentives (e.g., premium rates for bundled services), and targeted promotional offers. Instead of raising rates across the board, banks often selectively reprice CDs or MMDA tiers most at risk of attrition, while leaving more stable transaction accounts untouched. This intentional strategy protects net interest margin while managing churn risk.

Even so, banks must be cautious: Raise rates too little and customers leave; raise too much and margins collapse. Successful ALCOs strike a delicate balance between loyalty, market competitiveness, and capital planning.

Banks such as Huntington, Wintrust and U.S. Bank offer compelling examples of this discipline, illustrating how banks are managing rate sensitivity, loyalty, and funding cost structures.

The Mechanics of Repricing and Sticky Behaviors

Why haven’t deposits simply chased the highest available yield? The answer lies in a combination of pricing strategy, customer inertia, and relationship value.

Banks’ internal repricing occurs gradually through ALCO oversight, rate tiering, and relationship management, rather than instant market reaction. This results in a slower but more deliberate adjustment of rates, particularly for transactional and savings accounts.

For example, relationship-based non-interest checking remains remarkably stable at many regional banks. Bundled treasury services, core account benefits, and trust in FDIC insurance all contribute to this deposit stickiness.

Case Studies:

• Huntington Bancshares grew total deposits 1.8% QoQ ($2.8B) and 7.6% YoY ($12B), with net interest margins expanding by 15 basis points (bps).
• Wintrust Financial posted a 9% annualized QoQ deposit increase ($190M), while maintaining ~30% of total deposits in non-interest-bearing accounts ($2.5B) — a strong signal of loyalty.
• U.S. Bank National Association deposits were down slightly YoY (~3%) but this was a strategic approach that reduced total cost of funds through disciplined deposit pricing (61 bps down from 65 bps) delivering over $300M of reduced cost of funds.

Additionally, banks are managing a balancing act across deposit categories:

• CDs (time deposits) offer higher advertised yields but are often used strategically to lock in certain funding layers.
• Money Market Deposit Accounts (MMDA) remain sensitive to rate movements but still provide flexibility.
• Savings accounts tend to exhibit slow repricing and strong relationship loyalty.

Behavioral psychology also plays a role. Studies suggest that many retail depositors exhibit “rate apathy” unless rate differentials exceed 150–200 basis points. For many consumers, convenience, safety, and established relationships outweigh incremental yield.

Generational patterns are also emerging: Older consumers tend to prioritize security and personal service, while younger cohorts value mobile-first experiences and rewards ecosystems. Successful banks tailor offerings to these distinct expectations.

Customer segmentation has also become essential. Baby Boomers often demonstrate the highest average balances and strongest loyalty to traditional institutions — valuing safety, human interaction, and physical branches. Gen X and Millennials, by contrast, prioritize convenience, mobile access, and financial incentives. Gen Z — the newest wave of savers — expects real-time notifications, digital-only support, and hyper-personalized offers.

Leading banks are tailoring deposit strategies by segment: Using CRM and core data to push targeted offers, stagger promotional maturities, and reduce attrition risk. Behavioral segmentation is now as important as rate tables in driving deposit growth.

Dig deeper:

• Beyond Promotional Rates: Building a Sustainable Strategy for Deposit Growth
• Five Ways to Strengthen Your Institution for a Falling Rate Cycle
• Citizens Bank Insulates Against Economic Turmoil With Focus on Upmarket Consumers

Why Deposits Remain Fundamentally Stable

While outflows dominated headlines in 2023, the underlying stability of bank deposits is notable. Industry studies reveal that average deposit outflows typically remain below 1.2% per quarter, while inflows hover around 3–3.5%.

Behavioral economics plays an important role: the average bank customer is surprisingly “sticky.” Switching friction, perceived safety, convenience, and digital banking relationships all create retention strength.

Furthermore, many banks deepened their retail relationships through bundled service offerings: credit card rewards tied to deposits, fee waivers, loyalty perks, small business account synergies, and wealth advisory links.