Over the past year, financial institutions across the country have seen an acceleration in funding costs. Historically, institutions have been successful in delaying rate increases on deposits during the initial stage of the rate cycle, then slowly increasing deposit rates for the second third of the cycle. From late 2015 through 2017, institutions enjoyed the benefit of margin expansion and relatively stable, low funding costs. During this time, depositories generally used a combination of investment portfolio roll-off and organic deposit growth to fund loans while strategically using wholesale funding as an alternative to meaningfully raising in-market deposit rates.

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By Todd Taylor, Founder & President, Taylor Advisors