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For Stearns Bank CEO Kelly Skalicky, the smart deposit strategy involves paying out more in interest and collecting fewer fees.
In December, the St. Cloud, Minnesota-based Stearns said it would waive fees on automatic teller machine withdrawals. Last month, Stearns eliminated its $30 charge on overdrafts.
Banks cutting back on overdraft charges made big news in 2021 and 2022. A number of institutions announced plans to reduce fees. Others, including Detroit-based
The Rosemont, Illinois-based Wintrust Financial
The trend appears to have cooled more recently. A
For her part, Skalicky said she understands the reasons banks charge fees, citing the cost of offering deposit services. On a practical level, however, Skalicky doubts the long-term viability of relying on these fees.
“You look at [some] really big banks, they have more than $1 billion in [annual] overdraft fees,” Skalicky told American Banker. “That’s not a successful business model, or sustainable, frankly.”
Stearns’ plans to eliminate overdraft charges come amid a debate over a proposed rule by the Consumer Financial Protection Bureau limiting such fees to $5 at banks and credit unions with more than $10 billion of assets. The planned rule, which was unveiled in December, drew sharp criticism,
Rohit Chopra, who was director of the CFPB when the rule was proposed, said at the time that overdraft fees were never meant to be a major profit driver for banks. The CFPB claimed the rule would save consumers $225 per household, or $5 billion a year.
Since then, both the
“The CFPB overdraft rule would have harmful unintended consequences on the consumers and local communities that community banks serve by causing them to experience the harsh realities of rejected payments,” Independent Community Bankers of America President and CEO Rebeca Romero Rainey said in a press release.
Overdraft fees currently average about $27, according to the Bankrate survey.
Getting rid of overdraft fees wasn’t a huge leap for Stearns; the fees totaled $95,000 in 2024. “We are not a fee-driven bank,” Skalicky said, adding that Stearns is continuing to pay overdrafts.
For most customers, “it’s just a cash-flow [issue], so it can be quickly fixed,” Skalicky said.
Stearns also pays interest on all of its deposit accounts, including consumer checking. “There’s some misnomer out there like, if you have a checking account, you don’t get interest,” Skalicky said. “It’s not like a bank rule or regulation. That’s just what some banks choose to do.”
Stearns’ strategy involves a tradeoff. While customers likely appreciate more interest and fewer fees, the bank’s cost of funding interest-earning assets runs higher than the industry average, 3.05% compared with 2.61% in 2024 according to the Federal Deposit Insurance Corp. At scale, the 44-basis-point difference can translate to millions of dollars in added expense.
Stearns relies on revenue generated by its menu of commercial-banking business lines, including construction finance, nonprofits, Small Business Administration lending and equipment finance, to make its model work. So far, the company has been successful, reporting a return on assets above 1.4% in each of the six years of Skalicky’s tenure as CEO, including 1.56% in 2024.
“Our job is to take care of our customers, do a really good job and then we’ll be fine,” Skalicky said. “We’ve done that and we’ve developed these kind of niche areas across the country that serve a need.”
Skalicky