Regional Bank Deposit Costs May Have Peaked: 73% of Mid-Size Lenders Cut CD Rates in April

The deposit pricing war among regional and community banks may be winding down. A FinServ Pulse analysis of rate sheets from 340 institutions with $1 billion to $50 billion in assets shows 73% reduced at least one promotional CD rate in April — the highest proportion since the Fed began its rate-hiking cycle in 2022.

The median 12-month CD rate at surveyed banks fell 18 basis points to 4.62% APY, down from the October 2025 peak of 5.15%. The retreat is most pronounced at banks that had priced most aggressively during 2024-2025 deposit competition.

Bankers cite stabilizing deposit flows and the absence of further Fed hikes as the primary drivers. "We were pricing defensively when money was leaving for money market funds and Treasury bills," said the CFO of a $12 billion Midwest bank who spoke on condition of anonymity. "That pressure has largely subsided."

The shift has positive implications for net interest margins across the sector. KBW estimates that a 20bp reduction in average funding costs adds approximately 5-7 basis points to NIM for a typical community bank — material when starting from a 3.0-3.2% base.

Not all banks are retreating equally. Institutions with heavy CRE concentrations continue to price aggressively to maintain liquidity buffers, while those with diversified funding sources are pulling back fastest.