There's a lot to unpack in this month's update. The Fed’s new chair is signaling a tougher stance on inflation, which could impact the margin relief many community banks have been hoping for. Deposit insurance is having a moment too, with the FDIC proposing lower premiums and a new private option emerging for coverage above standard limits.
At the same time, bank M&A activity is picking up, credit unions are piloting stablecoins and tokenized deposits, and banks are taking a closer look at how they manage rising AI costs. On top of that, cannabis banking reform is back before Congress. In short, it’s a busy month, and a good time to catch up.
If your bank has been surprised by a recent AI bill, you're not alone. Banks are adjusting to a shift in how AI providers charge for their tools, moving from flat subscription pricing to usage-based billing tied to the volume of data processed, measured in units called "tokens." The change has caught some financial institutions off guard, with executives at banks including PNC describing the resulting costs as steep. In response, banks are matching the size of the AI model to the complexity of the task rather than defaulting to the most powerful option, experimenting with open-source models, saving answers to repeated queries instead of rerunning them, and building more AI infrastructure in-house to reduce dependence on third-party vendors.
Cost isn’t the only concern. New AI models are also raising risk questions. Anthropic’s Mythos, designed to detect cyber vulnerabilities, drew scrutiny over potential misuse if accessed by bad actors. A more controlled version, Fable 5, was briefly suspended after researchers were able to bypass its safeguards before returning to general availability on July 1. Meanwhile, Rep. Bill Foster (D-IL) warned in a recent House Financial Services Committee hearing that agentic AI could compress the timeline of a bank run from hours to seconds, urging regulators to prepare accordingly.
AI is becoming more powerful, but also more complex to manage. Rising costs, evolving capabilities, and new risks make flexibility increasingly important. For community institutions, the goal may not be choosing a single AI solution and sticking with it. It may be building an approach that can adapt as the technology changes. Banks that stay flexible on vendors, models, and spending are likely to be better positioned as AI continues to evolve.
Read more about how core banking provider DCI approached AI governance in this profile of CEO Sarah Fankhauser:
If you've been watching what your bank pays into the Deposit Insurance Fund, some potential relief is ahead. In late June, the FDIC approved a proposal to lower assessment rates, citing the fund’s improved health. Small banks would see a two-basis-point reduction, while larger institutions would get a one-point cut.
There’s another notable change: the threshold for what counts as a “large” bank would jump from $10 billion to $30 billion in assets (and be indexed to inflation going forward). That means a number of mid-sized banks could qualify for the lower rate. FDIC Chair Travis Hill pointed to the fund’s recovery since the 2023 regional banking stress as the reason it’s time to ease back. The proposal is now open for a 60-day comment period.
At the same time, the private sector is stepping in to address a related gap, which is coverage above FDIC limits. FinPro recently launched The Alliance Consortium, a bank-owned model that offers excess deposit insurance through a captive structure, with Fiserv joining as a strategic investor.
These developments touch two sides of the same issue. Lower assessment rates could free up some capital. Expanded options for excess coverage could make it easier to compete for larger deposits, especially from commercial clients and public funds.
Both are still evolving. The FDIC proposal has to make it through the comment process, and newer private options like The Alliance will need to prove traction. But together, they signal a shift worth watching in how deposit insurance is priced and how it’s used competitively.
Federal Reserve Chair Kevin Warsh made it clear the central bank is committed to bringing inflation back to its 2% target, pushing back (at least for now) on calls for rate cuts. He didn’t signal specific next steps, but markets are already reacting, with some investors now pricing in a potential rate hike as early as September.
For community banks, that adds a wrinkle to an already evolving margin picture. After a strong 2025, helped in part by easing deposit costs, analysts say the path forward may be less favorable. A recent S&P Global Market Intelligence report points to fewer expected rate cuts and renewed competition for deposits. One sign: more banks are once again offering over 3.5% on one-year CDs after a period of decline.
If your 2026 plan assumes steady margin expansion and continued relief on deposit costs, it may be worth a second look. The outlook isn’t all negative, but it is tighter. Slower funding relief, combined with rising credit provisions, points to a more constrained environment. That doesn’t spell trouble, but it does leave less room for error, especially when it comes to deposit pricing.
Several in-state and regional bank mergers were announced in June, continuing a wave of community bank consolidation. In Michigan's Upper Peninsula, Superior National Bank and Range Bank will merge into a $1.68 billion-asset institution called Superior Range Bank. Nearby, Mount Pleasant-based Isabella Bank Corp. is acquiring Grand River Commerce for roughly $54.6 million, extending Isabella's reach into the Grand Rapids market. In Wisconsin, North Shore Bank agreed to buy 1895 Bancorp of Wisconsin, parent of PyraMax Bank, for about $95 million, creating a combined institution with roughly $3.1 billion in assets.
Elsewhere, Colony Bankcorp agreed to acquire First Reliance Bancshares in a $163 million stock-and-cash deal that brings the Georgia-based bank into South Carolina and creates a $5 billion-asset institution. In the Washington, D.C. area, Old Dominion National Bank and The National Capital Bank of Washington agreed to a $98 million merger of equals that would create a $2.4 billion-asset bank under the National Capital Bancorp name. In Texas and Oklahoma, MidFirst Bank agreed to acquire Dallas Capital Bank, a $1.2 billion-asset commercial bank, for an undisclosed sum, while Oklahoma City-based BancFirst agreed to buy Tulsa's SpiritBank.
Looking at the bigger picture, the pace is a little slower than last year. Banks announced 69 deals between January and early June, compared to 188 for all of 2025. Some analysts point to inflation concerns and broader economic uncertainty as reasons banks may be taking a more measured approach.
Most of these deals follow a familiar pattern: consolidation among community banks in the $500 million to $2 billion asset range, often involving institutions in the same or nearby markets. The motivation is often about gaining scale to manage rising technology investments, regulatory requirements, and operating costs.
The relatively slower pace of announced deals this year suggests some banks may be waiting for more clarity on interest rates, valuations, and the broader economic outlook before making a move. Whether activity picks up in the second half of the year will likely depend on how those factors evolve.
Stablecore, a digital asset infrastructure provider, has partnered with credit union service organization Circuit and fintech investment collective Curql to launch an early-access program letting credit unions test stablecoin payments, tokenized deposits, and other digital asset services before deciding whether to offer them to members. Three credit unions, RBFCU, Stanford Federal Credit Union, and La Capitol FCU are part of the initial group. The program integrates with participating institutions' existing digital banking platforms, and Stablecore frames it as a way for credit unions to retain deposits as members explore digital asset options through fintechs and crypto-native platforms.
The pilot comes as momentum builds across the broader digital asset market. More than 140 companies, including large banks such as BNY, U.S. Bank, and Huntington, along with Visa, Mastercard, Stripe, and Coinbase, launched a jointly governed stablecoin called Open USD this week, aiming to reduce the fees and volume limits that have limited stablecoin use for business transactions. Separately, SEC Chair Paul Atkins said tokenized bank deposits could receive regulatory approval as soon as 2027. Unlike stablecoins, tokenized deposits would remain on a bank’s balance sheet rather than being backed by reserves held elsewhere.
The Stablecore pilot shows how digital asset tools are starting to move beyond large financial institutions and into the technology ecosystems used by community institutions. For credit unions, an early-access model offers a chance to explore the technology, compliance requirements, and member demand before committing to a broader rollout. Whether tokenized deposits become a practical option for smaller institutions as quickly as they do for larger banks remains to be seen, but the shift is worth watching. Digital asset infrastructure is no longer just a conversation among the biggest players.
Read more about tokenized deposits vs stablecoins:
A bipartisan group of lawmakers reintroduced cannabis banking reform legislation in late June, picking up a theme from our May coverage of the federal reclassification of medical cannabis from Schedule I to Schedule III, a less restrictive classification. The legislation would prevent federal regulators from penalizing banks for working with state-legal cannabis businesses, including limiting deposit insurance solely because of those relationships.
Even with the recent rescheduling, supporters say the bill is still necessary. Adult-use cannabis remains illegal at the federal level, leaving banks stuck navigating conflicting state and federal rules. Today, about 816 banks, roughly one in five, serve cannabis-related businesses, according to FinCEN. And while versions of SAFE have passed the House multiple times, the Senate has yet to move it across the finish line.
For now, not much has changed on the ground. Banks and credit unions still face a patchwork of regulations when it comes to cannabis-related businesses.
What has changed is the backdrop. With the administration signaling support for rescheduling, this version of the bill may have a different path than previous attempts. Still, whether it gains real traction in Congress remains an open question.
Last month, we covered AI's expansion into core banking infrastructure, a boost to SBA lending limits, and a CRE rebound. Missed it? Read it here.
Acceleron is a modern correspondent banking platform that empowers community banks and credit unions to automate international wire transfers, capture non-interest income, and compete more effectively with big banks. With a foreign exchange (FX) marketplace and currency conversion engine, Acceleron’s API-first infrastructure helps institutions turn cross-border payment flows into efficient, revenue-generating opportunities. Serving over 200 financial institutions and facilitating more than $1 billion in international payments annually, our correspondent banking services and international payment automation solutions are pre-integrated seamlessly with Fiserv Payments Exchange, Aptys, and other leading payments platforms.
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Daisy Lin, Head of Marketing, Acceleron: 7/9/26 10:17 AM
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