Core deposits and the core deposit intangible are worth less in lower interest rate environments like we are seeing now. What is not often discussed, though, is how that value changes significantly as interest rates rise.

The pricing on many deposit accounts are sticky and tend not to increase as quickly as market interest rates rise. This allows banks to increase their interest rate margins as rates rebound, thus increasing the value of core deposits. These low cost deposits, along with greater loan demand as the economy expands, drives profitability and margin.

Banks that are in markets that expect loan demand to increase as the economy rebounds should move quickly to acquire institutions with core deposit rich balance sheets. This strategy will drive future earnings and shareholder value.