Rate Wars OR Relationship Deposits: How Banks and Credit Unions Can Win Corporate Cash in a Higher-for-Longer Market

16 minutes ago

4 min read

Deposits are growing. Cheap deposits are not. The institutions that win corporate cash will do it on structure and service, and they will do it where treasurers are already comparing.

Ask a bank or credit union funding lead how deposits are going and the answer is often "fine." Ask how funding costs are going and the answer changes.

Both answers are true, and the gap between them is the story of 2026. Balances are growing. The mix behind those balances has moved toward the expensive end, and it is not moving back soon. For institutions that want to grow loans, the question is no longer how to find deposits. It is how to find the right ones.

The numbers behind the headline

The FDIC's second-quarter profile shows a healthy system on the surface. Domestic deposits rose 0.8%, the eighth consecutive quarterly increase. Yet industry net interest margin was 3.32%, up only one basis point.

The explanation sits in the mix. Mercer Capital's data for community banks with $100 million to $5 billion in assets shows:

Interest-bearing non-maturity deposits fell from 54% of deposits in the second quarter of 2022 to 47% in the first quarter of 2026.
Time deposits rose from 17% of deposits to 30% over the same period.
Noninterest-bearing deposits slipped from a 26% peak to 21%.

Mercer's read is that funding loan growth at the margin is now more expensive, and that 2026 earnings depend on whether the improvement is supported by relationship deposits.

S&P Global Market Intelligence adds the timing. It finds that 87.2% of certificates of deposit mature within 12 months and 42.4% within three, so repricing at today's rates will lock in higher funding costs well into 2027. S&P calls the structural funding challenge a persistent drag through at least 2027, and notes that deposit competition now includes stablecoins and Fintechs as well as other banks.

Why relief is not coming

The rate backdrop has turned against anyone waiting for funding costs to ease. The Fed raised its target range by 25 basis points to 3.75%-4.00% on September 16, its first hike since 2023, and meets again October 27-28. Our September post on the long end of the Treasury curve, The Slow-Burn Crash, traced how the benchmark everything else prices from has been repricing all year.

Credit unions feel the same pressure from a different angle. NCUA's second-quarter data show loans outstanding up 4.9% over the year while insured shares and deposits rose 4.3%. Loan growth is outpacing share growth, and NCUA's 2026 supervisory priorities call for diversified funding and strong liquidity risk management.

How the corporate treasurer sees it

Corporate balances are where funding strategy gets tested. They are large, often above the insured limit, and held by people whose job is to compare.

The St. Louis Fed puts the share of uninsured deposits at US commercial banks at 43.3% at the end of 2025, and notes that uninsured depositors are less stable because they have a strong incentive to move if they suspect trouble. Add a treasurer with a rate sheet and a policy that requires more than one quote, and the outcome is predictable. The cash is going to be compared.

For a bank or credit union, there are only two real choices. Be in the comparison and compete on something other than the headline rate, or be absent from it and learn about the balance only when it leaves.

Three ways to win without a rate war

A rate war is the one contest where a bank under margin pressure has the least to gain. Three levers matter more.

Structure. Term, size, and laddering shape the value of a deposit to a funding plan. A treasurer who wants to place cash for 30, 60 or 90 days around a maturity schedule is offering predictability. An institution that can quote quickly across terms, within its own limits, can price that predictability instead of just matching a headline number.
The operating relationship. Mercer makes the point in the lending context: a commercial relationship that brings operating deposits and other touchpoints is worth more than balance-sheet growth alone. The same logic applies to corporate cash. Surplus balances placed with the institution that also runs the operating account, the payments, and the credit line are stickier than balances placed for rate alone.
Presence and speed. Treasurers compare the quotes they receive. An institution that answers within the same session, with the same format as everyone else, is in the decision. One that answers by email the next day usually is not.

This is not an argument against competitive pricing. It is an argument for competing on more than price, and for making sure the competition happens where the decision is made.

The takeaway

Corporate treasurers already compare banks. The practical question for a bank or credit union is how to be in that comparison efficiently, on the strengths it actually has.

Likwidity gives treasurers one place to request quotes from 10+ banks in a single step, with approvals, limits and an audit trail built in. No brokers, zero commission, pure SaaS. For an institution on the quoting side, that means a standard, auditable way to appear in comparisons it would otherwise never see. The same workflow serves your own treasury when you place surplus liquidity with other counterparties.

The bottom line

Higher for longer means funding costs that stay sticky and a mix that keeps leaning toward time deposits. The institutions that grow loans profitably through 2027 will be the ones that win relationship deposits on structure and service, and that show up where corporate treasurers compare.

Want to see how your institution would appear in a multi-bank comparison? Schedule a demo with Likwidity

Likwidity. Intelligent Liquidity, Automated.