A Note from our CEO, Scott Soderberg

 

After 232 years of making pennies, the U.S. Mint produced its final batch on November 12, 2025.  By then, the cost to produce one penny had risen to 3.69 cents, and of course its purchasing power had also waned significantly over time.  Additionally, the reduced use of physical cash and the growing dominance of electronic payments also supported the phaseout of the penny.  Cash payments in general, according to the Federal Reserve Bank (the Fed), had fallen to 14% of all transactions by 2024.

Banks and other financial institutions order coins from their local Fed branch, through distribution vendors (armored vehicle companies).  While the Fed is accepting deposits of pennies, due to reduced circulation of them, they are not always able to fill banks’ penny orders.  Further, some merchants have begun to round cash purchases up or down to the nearest 5 cents; prices with the final digit of cents ending in 1, 2, 6, and 7 are rounded down, and those ending in 3,4, 8, and 9 are rounded up.  While this process is likely the inevitable result (along with merchants simply pricing items to the nickel), the rounding process is not something that retailers want to do for various practical reasons.  Also, one article by the Richmond Fed refers to a study showing evidence of what they term a “rounding tax” for consumers, whereby transaction amounts can be generally set where they would consistently be rounded up.  See Rounding Up: The Impact of Phasing Out the Penny | Richmond Fed.

However, pennies are still legal tender and will be indefinitely.  Up to 250 billion pennies are still out there as of late 2025.  It is reasonable to think that if most of those pennies continued to actually circulate, there would be enough of them to satisfy merchants’ needs for making exact change for some time into the future.  The fact is that pennies are not in circulation because they are being hoarded, stockpiled, or simply ignored for various reasons.  Consequently, like with all other financial institutions, it is becoming difficult for our bank to keep enough pennies on hand to fill our business customers’ requests for them in their change orders.

As I have often said in my newsletter articles, community banking is a “two-way street”.  We help our customers by providing them with resources and financial tools to thrive, and our customers support us by entrusting their deposits to our care so we can in turn lend money to local businesses and individuals.  In that spirit, we’d like to make a request of you.  We would love it if you’d consider gathering up any pennies that might be collecting dust somewhere, and deposit them in your account(s) with us or convert them to cash.  Quite literally, this activity directly supports our business community and the local economy by increasing our ability to get them the pennies they need.  Further, as the value of the penny will continue to decline, including them in a deposit or turning them to cash makes them useful now.

Bet you never thought your bank would ask you for help, right?  😊

Elsewhere in this newsletter, watch for our penny deposit promotion.  Thanks for your continued partnership!