The Federal Home Loan Bank of Boston's Marginal
Cost of Funds Analysis can show you how to minimize the cost
of growing your institution at the margin. By measuring the
impact of deposit disintermediation, you can learn the true
cost of your incremental funds.
Avoid Paying up to Grow Deposits
Today's increasingly rate-driven depositors are often opting
for the higher yields that mutual funds and stocks provide.
As a result, community financial institutions face slow deposit
growth, and many now see a larger role for wholesale funding
in their strategies for supporting loans and investments.
As the ratio of traditional "core" deposits to
assets weakens, net-interest spreads are threatened. And "paying
up" for retail deposits will only squeeze spreads more.
How to retain core deposits while controlling total liability
costs is a critical issue requiring careful evaluation
of deposit-pricing strategies and marginal costs of funds.
The Federal Home Loan Bank of Boston's financial strategists
would be happy to help you review methodologies, model potential
strategies, and consider the impact of alternative funding.
For more information about our Marginal Cost of Funds Analysis,
please contact your
relationship manager. The model is also available through Direct+, the Bank's online account-information and
transaction service for registered members.