Are You Banking On or With Deposits?

1

Are You Banking On or Are You Banking On or WithWith Deposits? Deposits?

Funding Strategies – Protecting Your Bottom LineFunding Strategies – Protecting Your Bottom Line

Greg Judge, VP, Sr. Financial Strategist Greg Judge, VP, Sr. Financial Strategist

Federal Home Loan Bank of Des MoinesFederal Home Loan Bank of Des Moines

2

Today’s RoadmapToday’s Roadmap

• Historical overview of deposits since 1934

• Peer comparisons– How do the “big guys” keep their deposit COF low?

• Pricing and structuring strategies

• Case studies of actual members

3

Why Liability Management Matters Aggregate Information for FDIC Insured Banks: 1934-2001

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001199819951992198919861983198019771974196819651962195919561953195019471944194119381935

Int Bearing Liabs / Int Earning Assets Non-Int Bearing Deps / Deps

NIBDs were over 70% of Deposits Until the 1960’s…

… now NIBDs are about 20% of deposits.

Liabilities Need to be Managed as Carefully as Assets…Especially Now!

1971

Funding Costs Started

Increasing

4

Interest Bearing Deposits / Interest Bearing Liabilities

Aggregate Information for All FDIC Insured Banks: 1934-2001

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

01

20

00

19

99

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34

Large Banks Have Supplemented Deposits Since the Early 1960’s

FHLB Access for Banks

1962 1989

Stock Market 100 Year Average Return is approximately 8%

0%

10%

20%

30%

40%

50%

60%

200

1

200

0

199

9

199

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193

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CDs / Deps

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

IBD COF CDs to Deposits IBD COF

No CD Data Was Available from 1942-1960

Can CDs really compete with the stock market and mutual funds for long-term investors?

Have Banks "Always" Relied Upon CDs for Funding?Total CDs to Total Deposits for All FDIC Insured Banks: 1934-2001

6

24-Quarter Interest Bearing Deposit COF ComparisonStatistics for All 1,503 Banks & Thrifts In FHLB Des Moines District

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

3-97 6-97 9-97 12-97 3-98 6-98 9-98 12-98 3-99 6-99 9-99 12-99 3-00 6-00 9-00 12-00 3-01 6-01 9-01 12-01 3-02 6-02 9-02 12-02

FED Funds (QA) 90th Pctle IBD Median 10th Pctle

Median StatisticsMax 4.98

Median 4.47Min 2.61

Why are some institutions consistently below the median?

7

Peer GroupsPeer Groups• FHLB DSM Bank Members with Assets Under $1 billionFHLB DSM Bank Members with Assets Under $1 billion

– 1,066 banks in group

– Assets = $124 billion

– Deposits = $101 billion

– IB Deposit COF near district median

• National Peer of Banks with Assets Between $1– 3 billionNational Peer of Banks with Assets Between $1– 3 billion

– About 200 +/- banks in group

– Assets = $363 billion

– Deposits = $268 billion

– IB Deposit COF near 10th percentile for our district

Why are they different?Why are they different?

8

Larger Banks Use More Supplemental Funding Funding Mix As a Percent of Assets

84% 83% 83% 83% 82%

78% 75% 75% 74% 74%

3% 4% 5% 5% 6%

5% 8% 8% 8% 8%

2% 3% 3% 2% 2%

6% 6% 6% 6% 6%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02

4.62 4.37 5.13 3.77 2.68 4.10 4.21 4.99 3.10 2.06

52 bps 16 bps 14 bps 67 bps 62 bps - - - - -

Quarterly COF on Int Bearing Liabs (IBL) and Difference from Peer

Total deposits Total borrowed money (inc FHLB adv)FFP & Sec sold under agree to repurch

1,066 Members Under $1 billion National Peer: $1-3 billion

9

Sources of Deposits: Percent of Total Deposits

77% 77% 77% 77% 76%

75% 76% 75% 75% 74%

14% 14% 13% 14% 14%

19% 16% 16% 17% 17%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Assumes Public Unit and Brokered Deposits are Interest Bearing - Totals Not Included in Retail IBDs or NIBDs

PUDs

Brokered

NIBDs

RetailIBDs

PUDs 8% 8% 8% 8% 8% 5% 5% 6% 6% 6%

Brokered 1% 1% 1% 1% 2% 1% 2% 3% 3% 3%

NIBDs 14% 14% 13% 14% 14% 19% 16% 16% 17% 17%

Retail IBDs 77% 77% 77% 77% 76% 75% 76% 75% 75% 74%

12-98 12-99 12-00 12-01 12-02 12-98 12-99 12-00 12-01 12-02


Proportion of Retail Interest Bearing Deposits is About the Same

10

National Peer: $1-3 billion1,066 Members Under $1 billion

Larger Banks Use Less CD FundingComparison of Deposit Structure: Percent of Deposits

Deposit Cost is a Function of Price and Structure

27% 26% 25% 25% 25%

22% 19% 16% 16% 15%

8% 8%8% 9% 10%

15%13%

13% 15% 16%

14% 15%15%

17% 18%

21%23%

24%28%

31%

51% 50% 52% 49% 47%

42% 45% 46%41% 38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12-98 12-99 12-00 12-01 12-02 12-98 12-99 12-00 12-01 12-02

4.59 4.30 5.05 3.69 2.56 3.94 3.96 4.70 2.94 1.85


CDs

MMDAs

Savings

Checking

Quarterly COF on Int Bearing Deposits (IBDs) and Difference From Peer

11

National Peer

Member Peer

12


Peer Comparison: Deposit COF DetailCalculated From Call Report Data

4.594.30

5.05

3.69

2.56

3.94 3.96

4.70

2.94

1.852.21 2.16

2.48

1.24

0.95

2.06 2.08

2.55

1.130.98

3.37 3.33

3.79

2.16

1.55

2.64 2.73

3.09

1.46

0.93

5.61

5.22

6.10

4.91

3.45

5.26 5.19

6.19

4.53

3.04

1.00

2.00

3.00

4.00

5.00

6.00

7.00


4.59 4.30 5.05 3.69 2.56 3.94 3.96 4.70 2.94 1.85

65 bp 34 bp 35 bp 75 bp 71 bp - - - - -

Quarterly COF on Interest Bearing Deposits and Difference From Peer

Rates on interest bearing deposits Rates on int bearing transaction accts.

Rates on Savings deposits Rates on CDs (blended)

More CDs Higher Cost

13


Larger Banks Emphasize Shorter-Term CDs

26% 27% 26% 27% 25%

34% 33% 31%35%

30%

47% 47% 50% 48%

44%

45% 46% 49%45%

41%

23% 22% 21% 21%

23%

17% 16% 16% 15%

21%

4% 4% 3% 4%7% 4% 4% 4% 5%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12-98 12-99 12-00 12-01 12-02 12-98 12-99 12-00 12-01 12-02

5.61 5.22 6.10 4.91 3.45 5.26 5.19 6.19 4.53 3.04

35 bp 3 bp -9 bp 38 bp 41 bp - - - - -

Quarterly CD COF and Difference from Peer

Pct of Total CDs

+ 3 yrs

1-3 yrs

3-12 mos

< 3 mos

Remaining Maturity Schedule from Call Report Data

14

13% 14% 14% 13% 12% 14% 15% 14% 14%11%

24% 24% 26% 23%21% 19% 21% 22%

19%

15%

12% 11%11%

10%11% 7%

7% 7%

6%

8%

2% 2%2%

2%3%

2%2% 2%

2%

3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12-98 12-99 12-00 12-01 12-02 12-98 12-99 12-00 12-01 12-02

5.61 5.22 6.10 4.91 3.45 5.26 5.19 6.19 4.53 3.04

35 bp 3 bp -9 bp 38 bp 41 bp - - - - -

Quarterly CD COF (blended) and Difference from Peer

Pct of Total Deps

+ 3 yrs

1-3 yrs

3-12 mos

< 3 mos


Larger Banks Use Less CDs in the Funding Mix Remaining Maturity Schedule from Call Report Data

Same Info - as a Percent of DepositsRecent CD Term Changes Insignificant in Larger

Context

15

26% 26% 25% 26% 26% 26% 26% 27% 26% 25% 25% 26% 26% 27% 27% 27% 27% 27% 26% 25%

46% 46% 47% 47% 48% 48% 48% 47% 48% 48% 50%50% 51% 50% 49% 48% 48% 46%

45% 44%

25% 25% 24% 23% 22% 22% 22% 22% 22% 23% 22% 21% 20% 20% 21% 21% 21% 21%23% 23%

4% 4% 4% 4% 4% 4% 4% 4% 4% 4% 3% 3% 3% 3% 3% 4% 4% 5% 6% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3-98 6-98 9-98 12-98 3-99 6-99 9-99 12-99 3-00 6-00 9-00 12-00 3-01 6-01 9-01 12-01 3-02 6-02 9-02 12-02

72% 72% 72% 73% 74% 74% 74% 74% 74% 73% 74% 76% 76% 76% 76% 75% 75% 73% 71% 70%

5.59 5.61 5.61 5.61 5.31 5.22 5.19 5.22 5.34 5.49 5.88 6.10 6.01 5.81 5.43 4.91 4.29 3.93 3.70 3.45

Percent of CDs Under 1 Year and Quarterly COF on CDs

+ 3 yrs

1-3 yrs

3-12 mos

< 3 mos

Rate Environments Have Not Affected TermsIs it really effective to pay up to extend CDs?

1,066 Members Under $1 billion

Median Percent of CDs Under 1 Year = 74%

Pct of CDs

16

Asset Yield and Cost of Funds TrendsQuarter and Median Information: March 1998 – Dec 2002

8.25 8.30 8.29 8.21

7.87 7.90 8.02 8.00 8.108.27

8.48 8.558.31

8.137.85

7.35

6.96 6.90 6.87

6.51

4.59 4.62 4.64 4.594.33 4.27 4.30 4.30 4.41

4.57

4.905.05

4.914.66

4.30

3.69

3.172.94 2.81

2.56

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02

2 bp -1 bp 8 bp 36 bp 9 bp 3 bp 0 bp -6 bp -10 bp -18 bp -19 bp 0 bp -6 bp 11 bp 14 bp 17 bp 24 bp 34 bp 57 bp 70 bp

39 bp 39 bp 44 bp 65 bp 49 bp 41 bp 45 bp 34 bp 34 bp 31 bp 32 bp 35 bp 42 bp 59 bp 69 bp 75 bp 74 bp 67 bp 68 bp 71 bp

Yield on IEAs 8.06% IBD COF 4.37% Fed Funds Qtr Avg

Peer IEA Yield Peer IBD COF

1,066 FHLB Des Moines Members Under $1 billion vs. National Peer of Banks $1-3 billion

Period and Difference From Peer in Basis Points for Interest Earning Assets and Interest Bearing Deposits

Asset yield advantage is offset by higher

COF on IBDs

20Q Median Diff: 6 bps

20Q Median Diff: 45 bps

17

Where to from Here?Where to from Here?

• Asset yields remain under pressureAsset yields remain under pressure– Markets and competition put pressure on yields

• Spreads will continue to be testedSpreads will continue to be tested– Assets continue to reprice/refinance downward

– Later, what if funding costs increase faster than asset yields?

• Cost of funds management may be solutionCost of funds management may be solution– Use alternative funding to support retail pricing and structuring activity

– Protect and stabilize core deposit base

18

Part IIPart II

Deposit Pricing and Structuring Strategies

19

The Multiplier EffectThe Multiplier Effect

• One of the largest values a dollar of advances can have is its effect on your overall deposit base.

• Borrowing from the FHLB will not have much effect on your overall COF by itself, unless deposit pricing is also adjusted.

• With this approach, one dollar of advances will lower the cost of MANY other dollars of existing funding.

20

Deposits Are the Largest Component of Funding

A few dollars of borrowings can impact MANY dollars of deposits

84% 83% 83% 83% 82%

78% 75% 75% 74% 74%

3% 4% 5% 5% 6%

5% 8% 8% 8% 8%

2% 3% 3% 2% 2%

6% 6% 6% 6% 6%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


4.62 4.37 5.13 3.77 2.68 4.10 4.21 4.99 3.10 2.06


Quarterly COF on Int Bearing Liabs (IBL) and Difference from Peer

Total deposits Total borrowed money (inc FHLB adv)FFP & Sec sold under agree to repurch


21

How do you price your deposits?How do you price your deposits?

• The competition or local market surveys?The competition or local market surveys?– What if the market is skewed?

– How does this compare to your alternatives?

– How do you set limits?

• National data and the FHLB curve?National data and the FHLB curve?– Provides an objective structure

– Helps to instill pricing discipline

– Protects and stabilizes larger core deposit base

22

Pricing Your New and Renewing DepositsAre You Pricing Deposits 25-50 bps Below the Advance Curve?

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Checking and MMDA Rates Compared to 1-Week Repo Advance

Natl Avg Deps FHLB Des Moines

Natl Avg Deps 0.81 1.43 0.91 0.95 1.19 1.39 1.72 2.11 2.54 3.36

FHLB Des Moines 1.45 1.45 1.43 1.43 1.43 1.45 1.53 2.07 2.66 3.52

Checking MMDA 1 mo 2 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr

64 bp 2 bp 52 bp 48 bp 24 bp 6 bp -19 bp -4 bp 12 bp 16 bp

Tuesday, April 15, 2003

Rates and National Averages as of

Every 10 bps above the advance curve costs a MINIMUM of $1,000 per million, annually.

Does it really make sense to push short-term CDs out on the curve with rate specials?

Can you afford the +100 bps additional cost?

Deposit Source: Bankrate.com

Adv vs Deposit

1 mo CD vs 2 yr CD-120 bps

23

Marginal Cost of Funds ExampleMarginal Cost of Funds ExamplePromotion to Extend CD Terms

• Considering 2.50% 2-yr CD special

• Expect to attract 10% new money

• Assume repriced funds are short-term CDs

• Run promotion or use 5-yr Advance?

24

5 ($4)

Should you Raise Rates to Raise Funds ?

Use FHLB AdvanceNew Acct/Special $1.0 million

Sources of Funds : Save $5,770 = 577 bpsNew Money $0.1 million does not include FDIC or advertising & overhead expenses

Repriced Accts $0.9 million

Interest Rates :

Repriced Accts 1.75% ReRate: Promotion Rate 2.50%FHLB Advance 3.48%

0

Retail Strategy FHLB Advance

Marginal Cost : 9.25% FHLB Advance Cost : 3.48%Balance Increase Cost Borrowing Rate Cost

$900,000 0.75% $6,750(existing accounts) $100,000 3.48% $3,480

$100,000 2.50% $2,500 (net liab increase)

(new money)

Dollar Cost of Raising Rates : $9,250 Cost of FHLB Advance : $3,480

New Money

10%

Repriced Accts90%

5 yr Adv

Break Even Point = 43% New Money

Save Over $5,000 per Million by Not Raising Rates

25

4.73

4.12

3.56 3.62

3.72

0

5,000

10,000

15,000

20,000

25,000

Dec-01 Mar-02 Jun-02 Sep-02 Dec-02

-21 bp -21 bp -43 bp -13 bp 20 bp

Quarterly CD COF Difference From Peer

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

Avg. Time deposits of < $100,000 Rate on time deposits < $100,000 Peer Rate

Case Study: Raising Rates to Grow and Extend CDs Did Not WorkAverage Balance and Cost of Funds


26

3.71

3.15

2.992.91

2.75

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Dec-01 Mar-02 Jun-02 Sep-02 Dec-02

2 bp -2 bp 5 bp 10 bp 19 bp

Quarterly IBD COF Difference From Peer

2.00

2.20

2.40

2.60

2.80

3.00

3.20

3.40

3.60

3.80

Avg. Interest bearing deposits Rates on interest bearing deposits Peer Rate

Case Study: Raising Rates to Grow and Extend CDs Did Not WorkAverage Balance and Cost of Funds

This pricing change cost this bank about $18,156 (19bps) during the Dec 2002 quarter !


27

Reverse Marginal Cost ExampleReverse Marginal Cost ExampleLowering Rates on Existing Deposits

• Currently Paying 1.25% on MMDAs

• Considering lowering rate by 25 bps

• Replace any lost balances with 2-yr FHLB advance– Estimated balances at risk = 10% of total

28

Should You Pay Up to Retain?

Best Case: Drop Rates 25 bp With No Runoff 1.00%Balance Ann Int Exp

90% Rollover 900,000$ 9,000$ 1.00%

At Risk 10% 100,000$ 1,000$ 1.00% At Risk 10.00%

Total 1,000,000$ 10,000$ New Rate 1.00%

Former Rate 1.25%

FHLB Advance 2.02%

Leave Rates at 1.25% to Retain Balances 1.25%Balance Ann Int Exp

90% Rollover 900,000$ 11,250$ 1.25%

At Risk 10% 100,000$ 1,250$ 1.25%

Total 1,000,000$ 12,500$

0 1480

Drop Rates and Replace 10% Runoff with Advance 1.10% Save $1.5M by not raising rates

Balance Ann Int Exp ( 14.8 bps )

#### 90% Rollover 900,000$ 9,000$ 1.00%

Advance 100,000$ 2,020$ 2.02%

Total 1,000,000$ 11,020$

- Blend Retail Deposits with Advances and Lower Your COF 10%

90%

Break Even Point:

25% w/ 2yr Adv 49% w/ 1yr Adv

Lowering Rates 25 bps Could Result in Savings of up to $2,500 per million

29

Action PlanAction Plan• Determine how your deposit base compares to peer.Determine how your deposit base compares to peer.

– Rates– Structure

• Review and evaluate your deposit pricing practices.Review and evaluate your deposit pricing practices.– Do you try to keep every last deposit dollar?– How do you set limits for specials, promotions, special customers?– What TYPES of deposits are you targeting?

• Determine your FHLB capacity and other sources of funds.Determine your FHLB capacity and other sources of funds.

• Test your deposit elasticity.Test your deposit elasticity.– Lower rates incrementally– Were any balances lost?

• Contact your FHLB Regional VP for assistance.Contact your FHLB Regional VP for assistance.

30

Non-Maturity Deposits Are Key to Lower Funding Costs Deposit Categories and Median Rates: 1998-2002

4.59 4.62 4.64 4.594.33 4.27 4.30 4.30 4.41

4.574.90

5.05 4.914.66

4.30

3.69

3.172.94 2.81

2.56

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02

85% 85% 85% 86% 87% 87% 87% 87% 87% 86% 86% 87% 87% 88% 88% 88% 88% 87% 86% 86%

53% 53% 53% 51% 51% 51% 51% 50% 51% 53% 53% 52% 53% 53% 52% 49% 49% 49% 48% 47%

Percent of Deposits with Reported Terms of Less than One Year and CDs/Deposits

Rates on interest bearing deposits: 4.37% Rates on int bearing transaction accts.: 2.15%

Rates on Savings deposits: 3.31% Rates on time deposits (blended): 5.39%


Which Lines Are Consistently Lower and More Stable?

31

AppendixAppendix

Case StudiesCase Studies

From different states in FHLB Des Moines DistrictFrom different states in FHLB Des Moines District Assets of selected members are between $100-500mmAssets of selected members are between $100-500mm

32

Case Study OverviewsCase Study Overviews• Case Study #1 – Reached GoalCase Study #1 – Reached Goal

– Transitioned from just above median to under 10th percentile– CDs shifted from over 50% of deposits to 35%– Incrementally lowered rates, continually tested deposit elasticity

• Case Study #2 – Working Towards GoalCase Study #2 – Working Towards Goal– In high cost market, consistently near the 90th percentile historically– IBD COF now near the median, goal is to be below the median– Aggressively cut rates across the board

• Case Study #3 – Been There, Done ThatCase Study #3 – Been There, Done That– IBD COF has averaged in the 14th percentile over the last 6 years– Very consistent and disciplined deposit structuring and pricing

These members have funding plans…what is yours? These members have funding plans…what is yours?

33

Case Study #1- Used to base rates off of local market area - Incrementally cut rates - NIM is now over 6%

24-Quarter Interest Bearing COF ComparisonStatistics for All 1,503 Banks & Thrifts In FHLB DesMoines District

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00

Mar-97 Jun-97 Sep-97 Dec-97 Mar-98 Jun-98 Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02

32% 32% 47% 54% 60% 63% 58% 68% 65% 69% 70% 67% 61% 64% 76% 68% 36% 24% 15% 11% 11% 13% 10% 3%

-22 bp -19 bp -3 bp 5 bp 10 bp 13 bp 9 bp 20 bp 17 bp 21 bp 21 bp 18 bp 12 bp 15 bp 34 bp 24 bp -14 bp -34 bp -57 bp -77 bp -72 bp -61 bp -71 bp -104 bp

FED Funds (QA) 90th Pctle IBD Median 10th Pctle Subject

Percentile

Median Statistics Subject StatisticsMax 4.98 Max 5.22

Median 4.47 Median 4.50Min 2.61 Min 1.57

Average Percentile for Subject Bank45%

To Median

Deposits / TA = 72%

Adv / TA = 5.65%

34

Comparison of Deposit Structure: Percent of Deposits Deposit Cost is a Function of Price and Structure

22% 24% 26%31% 33%

27% 26% 25% 25% 25%

4%5% 4%

4%5%

8% 8%8% 9% 10%

22%25%

26%

29%27%

14% 15%15%

17% 18%

52%47% 44%

36% 35%

51% 50% 52% 49% 47%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12-98 12-99 12-00 12-01 12-02 12-98 12-99 12-00 12-01 12-02

4.74 4.50 5.22 2.99 1.57 4.59 4.30 5.05 3.69 2.56

15 bps 20 bps 17 bps -70 bps -99 bps - - - - -

CDs

MMDAs

Savings

Checking


Peer = 1,066 Members Under $1 billion

Case Study Bank #1

35


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00


86% 83% 85% 86% 89% 89% 90% 87% 82% 82% 86% 86% 85% 85% 88% 87% 85% 71% 67% 50% 52% 49% 50% 57%

44 bp 42 bp 45 bp 46 bp 51 bp 53 bp 58 bp 50 bp 37 bp 39 bp 45 bp 48 bp 44 bp 47 bp 61 bp 61 bp 52 bp 27 bp 18 bp 1 bp 3 bp -1 bp 0 bp 8 bp


Percentile




To Median

Case Study #2- Used to base rates off of local market area - Cut rates across the board - Added about 100 bps to NIM

Deposits / TA = 80%

Adv / TA = 10.24%

36

Peer Comparison: Deposit COF DetailCalculated From Call Report Data

5.044.80

5.59

3.77

2.69

4.594.30

5.05

3.69

2.56

2.172.00 2.02

0.73

0.46

2.21 2.16

2.48

1.24

0.95

4.14 4.04

4.34

2.06

1.44

3.37 3.33

3.79

2.16

1.55

5.90

5.55

6.47

4.94

3.63

5.61

5.22

6.10

4.91

3.45

1.00

2.00

3.00

4.00

5.00

6.00

7.00


5.04 4.80 5.59 3.77 2.69 4.59 4.30 5.05 3.69 2.56

45 bp 50 bp 54 bp 8 bp 13 bp - - - - -

Quarterly COF on IBDs and Difference From Peer

Rates on interest bearing deposits Rates on int bearing transaction accts.

Rates on Savings deposits Rates on CDs (blended)

Case Study Bank #2 Peer = 1,066 Members Under $1 billion

37


0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

6.50

7.00


24% 23% 21% 20% 21% 22% 19% 10% 8% 8% 18% 14% 20% 18% 15% 15% 17% 8% 9% 6% 6% 6% 7% 8%

-33 bp -34 bp -40 bp -43 bp -40 bp -38 bp -42 bp -72 bp -77 bp -74 bp -42 bp -55 bp -39 bp -46 bp -56 bp -54 bp -48 bp -76 bp -83 bp -110 bp -99 bp -95 bp -84 bp -78 bp


Percentile




To Median

Case Study #3- Always under median - Emphasizes non-maturity deposits – Very Stable NIM

Deposits / TA = 83%

Adv / TA = 6.92%

38

Comparison of Deposit Structure: Percent of Deposits Deposit Cost is a Function of Price and Structure

36% 36% 36% 39% 37%

27% 26% 25% 25% 25%

7% 6% 5%5% 5%

8% 8%8% 9% 10%

21% 24%21%

22%21%

14% 15%15%

17% 18%

36% 34%38%

34% 37%

51% 50% 52% 49% 47%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

12-98 12-99 12-00 12-01 12-02 12-98 12-99 12-00 12-01 12-02

3.82 3.77 4.44 2.66 1.83 4.59 4.30 5.05 3.69 2.56

-77 bps -53 bps -61 bps -103 bps -73 bps - - - - -

CDs

MMDAs

Savings

Checking


Case Study Bank #3 Peer = 1,066 Members Under $1 billion

39

Action Plan – Is Your COF as Low As It Can Be?Action Plan – Is Your COF as Low As It Can Be?• Determine how your deposit base compares to peer.Determine how your deposit base compares to peer.

– Rates– Structure

• Review and evaluate your deposit pricing practices.Review and evaluate your deposit pricing practices.– Do you try to keep every last deposit dollar?– How do you set limits for specials, promotions, special customers?– What TYPES of deposits are you targeting?

• Determine your FHLB capacity and other sources of funds.Determine your FHLB capacity and other sources of funds.

• Test your deposit elasticity.Test your deposit elasticity.– Lower rates incrementally– Were any balances lost?

• Contact your FHLB Regional VP for assistance.Contact your FHLB Regional VP for assistance.

Are You Banking On or With Deposits?

Documents

bearing deposits

deposits ibds

brokered deposits

sources of deposits

percent of total deposits

banks thrifts

large banks

ib deposit cof