Banks that won on deposit growth in 2025 got boost from M&A

• Key insight: Regional banks that completed M&A deals in 2025 would have seen slower-than-average core deposit growth without their acquisitions.
• Supporting data: Absent the acquisitions, banks in the $10 billion-$100 billion asset tier that completed deals last year likely would have grown core deposits by less than 2%, according to research from Invictus Group.
• Forward look: The bank M&A boom has been heating up, with deposit franchises serving as a key motivating factor for some buyers.

Banks with between $10 billion and $100 billion of assets grew their core deposits far more than the broader industry last year, as economic shifts continued to put pressure on how much client cash financial institutions could reel in.
Across the industry, core deposits increased by about 4% in 2025, according to an analysis by the banking data and advisory firm Invictus Group. The rise marked an improvement from the previous three years, which had been marred by rapid increases in deposit costs and liquidity concerns following a spate of bank failures.

Invictus Group President Adam Mustafa said that core deposit performance in 2025 was a "pleasant surprise." But he found that many of the lenders that outperformed the industry weren't just drawing in funds organically.

While banks with between $10 billion and $100 billion of assets outpaced the industry, boosting their core deposits by more than 8%, mergers and acquisitions seemed to be their secret sauce.

"If we connect the dots here, there's a segment of banks within the mid-size regional bracket here who really were dependent on M&A to grow deposits," Mustafa said. "Because if they didn't do M&A, their deposits would have grown at a slower rate than the market."

For the 27 banks in the $10 billion-$100 billion tier that bought other banks in 2025, core deposits went up by a collective 29%, or more than seven times the growth rate of the industry as a whole. 

At banks across all asset tiers that completed an acquisition last year, core deposits rose about 26%. But Mustafa estimates that those banks only increased their core deposits organically — as in, excluding the impacts of their deals — by about 2%.

"The question is, what's the chicken and what's the egg?" Mustafa said. "Did their deposits grow at a slower rate than the market organically because their management focus was on completing the acquisition? Or was it the other way around — they knew they were lagging in core deposit growth for whatever reasons, and they instead turned to M&A as a solution to address that?"

Using an acquisition to bolster core deposits can be a smart move in certain cases, such as during periods where it's difficult to boost that funding organically, Mustafa said.

For bank deals, 2025 marked the start of a comeback, as banks inked over 170 acquisitions, up more than one-third from 2024.

At the $67 billion-asset Columbia Banking System, core deposits declined during the first half of 2025. But following the company's acquisition of Pacific Premier Bancorp in the fall, its core deposits surged by 34% by the end of the year, compared with the same period a year earlier.

Columbia's management team has said that a key strategic consideration in acquiring Pacific Premier was gaining a foothold on deposit share in certain geographies, specifically Southern California.

The $31 billion-asset Eastern Bancshares, which acquired HarborOne Bancorp in November, grew its deposits by roughly 20% in 2025, but nearly all of that growth came from the HarborOne deal. The Boston-based company doesn't specify its core deposit trends in its quarterly earnings reports.

Excluding the merger, Eastern's deposits slightly decreased from the year prior.

Across the banking industry, deposit growth has been a tough story over the last few years, following a COVID-era surge in which stimulus funds rushed into banks.

In the first three quarters of 2022 and 2023, core deposits declined by 1.3% and 3.8%, respectively, according to an analysis by the Federal Reserve of St. Louis.

When the Federal Reserve started cutting interest rates in 2024, there was hope that expenses related to deposits would also drop dramatically. But the declines in deposit costs haven't nearly kept up with the roughly 175-basis-point drop in the federal funds rate.

And though deposit growth started to show improvement in 2024, the gains were modest. The first three quarters of that year delivered just 1.5% of core deposit growth.

Over the last year, nearly 40% of banks have experienced an increase in deposit competition, according to the latest IntraFi Bank Executive Business Outlook Survey, which was conducted in January. Some 47% of banks experienced no change, and the remaining 13% said the dynamic improved.

And the outlook on deposit competition appears to be getting worse.

Almost half of the bank respondents in the IntraFi survey said they expect competition for deposits to increase in 2026, while only 6% said they think the situation will improve.

The need for cheap deposits is especially dire at smaller banks, which tend to have higher loan-to-deposit ratios than larger institutions, according to Mustafa.

Acquisitions can deliver balanced growth — with loans and deposits increasing at the same time — which Mustafa said is an undervalued benefit of M&A.

"If you're growing organically, and you're good at growing loans, but it's hard to grow deposits, that's where you can end up constrained, or more dependent on brokered deposits or Federal Home Loan Bank advances — hot money," Mustafa said. "That's how you end up with a balance sheet that's out of whack."