Short answer: The median FDIC-insured bank paid a cost of funds of 2.33% in the quarter ending June 30, 2026, with the middle half of banks between 1.88% and 2.76%. Lower is better. Unlike most bank ratios, this one improves as banks get smaller: the median bank under $100 million paid 2.01%, while the median bank over $100 billion paid 2.63%.
The 2026 benchmark, by bank size
Cost of funds is what a bank pays for the money it lends out. It gets far less attention than margin or efficiency, and for anyone trying to borrow it is the more useful number of the three, because it is the one that determines whether a lender can actually move on price.
Here is the full distribution in the quarter ending June 30, 2026.
| Bank size (total assets) | Banks | Bottom quartile | Median | Top quartile |
|---|---|---|---|---|
| All banks | 4,231 | 1.88% | 2.33% | 2.76% |
| Under $100M | 537 | 1.49% | 2.01% | 2.53% |
| $100M - $300M | 1,215 | 1.81% | 2.21% | 2.67% |
| $300M - $1B | 1,431 | 1.93% | 2.37% | 2.76% |
| $1B - $3B | 625 | 2.13% | 2.48% | 2.91% |
| $3B - $10B | 264 | 2.12% | 2.52% | 2.88% |
| $10B - $100B | 127 | 2.06% | 2.53% | 3.04% |
| Over $100B | 32 | 2.23% | 2.63% | 3.42% |
Source: BankingLens, computed from FFIEC call reports for the quarter ending June 30, 2026. Quartiles are calculated across the full population of filing banks in each size band, not sampled.
This table runs the opposite way to most bank metrics
Efficiency improves as banks get larger. Cost of funds does the reverse: it rises almost monotonically with size, from a 2.01% median under $100 million to 2.63% above $100 billion. That 62 basis point gap is the community bank's structural advantage, and it is why a small local lender can sometimes beat a national bank on a commercial loan rate despite having none of its scale.
The reason is deposit composition. A small bank's funding is overwhelmingly local core deposits, a large share of it non-interest-bearing operating accounts that cost nothing at all. Those balances sit still. Large banks fund a much greater share of the balance sheet with money that reprices the moment rates move, including brokered deposits, Federal Home Loan Bank advances, large time deposits, and wholesale borrowings.
The tradeoff is capacity. The bank paying 1.6% for its funding usually cannot write a $40 million loan, and the bank paying 2.9% usually can. Cheap funding and scale rarely sit in the same institution, which is the real choice a borrower is making.
Why this is the number to ask a lender about
Borrowers usually open a rate conversation by asking for a lower rate, and get told the bank is already at its cost of funds. Almost no one asks what that cost actually is, and it is public information filed quarterly.
A lender funding itself at 1.9% against a 2.6% peer median has roughly 70 basis points of room its competitors do not have. Asking for its spread over cost of funds rather than a headline rate reframes the negotiation entirely: instead of arguing about a number the banker can call non-negotiable, you are discussing the margin the bank is adding, which is discretionary and which the banker knows you can now see.
The inverse matters just as much. A lender paying well above the peer median is not going to win a price competition, and knowing that early saves weeks of a process that was never going to end in the rate you wanted.
The trap: margin is not the same signal
It is common to read a compressed net interest margin as a sign a bank will compete on price. The logic runs backwards. A bank with a thin margin needs yield, and a lender that needs yield charges more, not less. What a compressed margin actually signals is hunger for the asset, which is real leverage, but it is leverage on structure, fees, prepayment terms and speed rather than on the coupon.
The bank that can genuinely cut your rate is the one with cheap, sticky funding, which frequently has a comfortable margin precisely because its funding costs so little. Those two conditions look similar from the outside and lead to completely different conversations.
Frequently asked questions
What is a good cost of funds for a bank?
The median US bank paid 2.33% for its funding in the quarter ending June 30, 2026, with the middle half between 1.88% and 2.76%. Below about 1.88% is top-quartile nationally. Small community banks systematically pay less, so the median under $100 million was 2.01% while the median over $100 billion was 2.63%.
What is the difference between cost of funds and cost of deposits?
Cost of deposits covers only what a bank pays depositors. Cost of funds is broader and includes borrowings such as Federal Home Loan Bank advances, brokered deposits, and subordinated debt. A large gap between the two indicates a bank leaning on wholesale funding rather than core deposits.
Why do smaller banks have a lower cost of funds?
Their deposit base is local, relationship-driven, and holds a higher share of non-interest-bearing checking accounts, which cost nothing. Larger banks fund a bigger portion of the balance sheet with rate-sensitive money such as brokered deposits, wholesale borrowings, and large time deposits that reprice quickly.
Does a low cost of funds mean a bank can offer better loan rates?
Yes, and this is the metric that actually determines it. A lender funding itself 80 basis points below its peers has genuine room to concede on price, while a lender paying above-market for deposits does not, no matter how much it wants the loan. Net interest margin does not answer this question, because a thin margin signals a bank that needs yield and will hold firm on rate.
How is a bank's cost of funds calculated?
Total interest expense on deposits and borrowings, annualized, divided by interest-bearing liabilities: interest-bearing deposits plus fed funds purchased and repos, other borrowed money, and subordinated debt. Both halves must cover the same funding, which is why borrowings belong in the denominator as well as the numerator.
Where these numbers come from
Every figure on this page is computed from the FFIEC call reports that all 4,296 FDIC-insured banks file each quarter, for the quarter ending June 30, 2026. Nothing here is modeled, estimated, or sampled. You can pull any individual bank behind these distributions on Bank Peer Intel, or, if you are trying to borrow rather than benchmark, see which lenders these numbers point to on Borrower Assist.