Navigating Liquidity: Trends and Strategic Opportunities for Community Banks

Liquidity remains a crucial factor in the financial industry. The year 2024 experienced significant changes in liquidity level, showcasing liquidity trends and opportunities for banks. Initially, liquidity was tight, but as the Federal Reserve reduced rates by 100 basis points, liquidity increased. Bankers’ Bank is currently observing higher levels of excess overnight funds than before the pandemic, indicating that customers have more available funds. Projections suggest that with two potential rate cuts by the end of the year, this trend may continue into 2025.

Furthermore, Bankers’ Bank has maintained the earnings credit rate despite the recent rate reduction. Consequently, funds left in customer accounts at the end of the day earn more than before. It is advisable for bankers to utilize this opportunity to cover monthly account analysis fees using the remaining account balance rather than incurring hard charges. For more information, please contact your Correspondent Banker to discuss optimal deposit strategies for your bank.