Northfield Bank: Funding $110 Million Without Buying It at the Wrong Price

Neither as presented. The treasurer's proposal is the more dangerous one because the headline rate hides the real cost.

The binding constraint is the $180M maturity wall at 2.85%. Northfield customers holding those CDs will roll into a 5.10% promotion at very high rates. Repricing $180M at +225bp costs about $4.05M a year in added interest - and that is not new money, it is existing money bought twice. Add the promotion's acquisition cost on top, plus the fact that 13 months is short enough that the entire balance reprices or leaves within two years.

The money market at 4.35% is cheaper, stickier, and relationship-linked, but the retail head is overstating it: a 45bp move in a low-beta product will not reliably pull $110M in a year, and it reprices the whole existing money-market book, which is a real cost that rarely appears in the proposal.

A defensible structure:

1. Targeted CD tranches for non-customers and for maturities only, with the rate held below the promo headline.
2. Money market emphasis for existing households, sold as a relationship product, with a tiered rate above a balance threshold.
3. Price the alternative honestly. Get an indicative FHLB advance cost. If wholesale funding is cheaper than 5.10% all-in, marketing has no business buying deposits at that price.

Marginal cost of new funds, including cannibalization, is the only number that decides this.

Allocate by where the money actually moves, not by channel tradition.

• Existing-customer retention and maturities (~$350K). This is the highest-yield spend in the plan. A bank with a $180M maturity wall that loses those balances to a competitor wins nothing by acquiring new money elsewhere. Use app messaging, statement inserts, and banker outbound calls to holders of maturing CDs. Banker calls are cheap per dollar retained and are the only channel that can move a $50,000 CD balance.
• Digital acquisition (~$250K). Paid search and social aimed at rate-sensitive savers outside the current base, geo-targeted to the branch footprint where the app is strongest. This is the only genuinely incremental source, so measure it as such.
• Branch (~$100K). Staff training, signage, and appointment capacity - not media. Branch's role here is conversion, and conversion fails when a branch is short-staffed during a promotion.
• Reserve (~$50K). Held back for the tranche that performs, released at week six on evidence.

Key controls: cap the promotional rate publicly so it is a limited tranche rather than an open-ended promise, and set a hard rule that no CD holder is contacted with the promotion until retention messaging has been tried first.

Several, and most are amplified by short promotional windows.

• Rate expiration. The rate applies for 13 months. If marketing implies the rate is a new normal, that is misleading. Disclose the term, the renewal rate (or that the renewal rate is variable and unknown), and the automatic rollover behavior prominently, not in fine print.
• Penalty and access. State the early-withdrawal penalty and any minimum balance clearly on the landing page, not only in the account agreement.
• Selective targeting. Offering a rate to new money but not to existing CD holders is a legitimate business decision, but publicly advertising 5.10% to the whole market while long-tenured customers sit at 2.85% creates a fairness and reputational exposure. Consider a loyalty tranche for renewals; it is cheaper than the attrition alternative.
• Tiering complexity. Money market tiers must be disclosed so a customer can predict their own rate; a rate that changes with balance is where complaints originate.

Run the creative through compliance before the first tranche opens, and treat the renewal mechanics as a product decision, not a disclosure footnote - that is where the complaints will come from twelve months later.