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Faced with a tough environment for deposit growth, banks are adjusting strategies to grow deposits and keep costs in check.
Since it was founded in 2005, Birmingham, Alabama-based ServisFirst Bancshares has rewarded its commercial bankers for growing deposit relationships, not just loans. The $16 billion bank’s leadership team made a decision on day one that they would fund the bank mainly through core deposits, rather than relying heavily on wholesale funds or brokered deposits.
“We deem core deposits as one of the most critical — if not the most critical — factors in the franchise,” says Chief Operating Officer Rodney Rushing.
Higher interest rates have created a tough deposit environment, with the effective federal funds rate topping 5% beginning in July 2023. Since the Federal Reserve’s rate increases began in March 2022, the banking industry has experienced quarterly declines in deposits, with the exception of the fourth quarter of 2023 and the first quarter of 2024, according to the Federal Deposit Insurance Corp. Altogether, that adds up to a total loss of roughly $1 trillion in deposits.
Not so at ServisFirst, which grew deposits by 8% year-over-year in the second quarter while holding deposit costs steady. That growth has come through emphasizing relationships as well as key in-market niches, something ServisFirst has in common with other banks seeking to grow deposits while managing costs.
To learn more about how deposit strategies are evolving at banks such as ServisFirst, download the report, sponsored by Janney Montgomery Scott, here.
