top of page
About Us
Insights
Events
Data-Driven Solutions
Model Validation & MRM
Asset/Liability Management
Darling Consulting Group Logo

Deposits360°® Monthly Industry Review

Writer's picture: Andrew MitchellAndrew Mitchell

Deposits360°® Monthly Industry Review

This month’s Review highlights notable trends and projections in DCG’s Deposits360°® Cross-Institution Analytics database and deposit pricing and volume models.


Learning from Data

 

Another year is upon us, and this month’s Update promises to facilitate productive deposit conversations as teams gear up for 2025. To start, we will look at the path that non-maturity deposit rates have taken over the last two rate cycles and see what lessons may emerge given the uncertainty of future rate movements. We will also consider recent dynamics in CD portfolios and highlight two metrics that every institution should be looking at to manage overall funding costs in the year ahead.


What Are We Missing?


In September 2022, DCG published an article highlighting that institutions were failing to measure the impact of upward deposit cost momentum in their baseline NII forecasts. At the time, the Fed was in the process of raising rates aggressively. Today, most practitioners understand and appreciate that rates will continue to adjust to prior market rate movements. However, it is still a new concept not always captured in ALM risk models. The more common modeling practice is to assume deposit rates will remain static in a baseline scenario.


Consider what the data has shown us over the last five years. The charts below show the average rates paid by Banks and Credit Unions for major product types. We highlighted the time periods over which the Fed was actively cutting rates and hiking rates.

Source: Darling Consulting Group Deposits360°®

Source: Darling Consulting Group Deposits360°®


If you look at the time periods following each cycle, the charts confirm that rates continued moving directionally lower or higher even when the Fed was holding its policy rate steady. In fact, total deposit costs at Banks continued to increase another 65bp in the 13 months that followed the latest tightening cycle. Credit Unions saw a similar dynamic, increasing 58bp in the period following the hikes. Importantly, the amount of catch-up in deposit rates following the peak or trough of a rate cycle is related to the pace and magnitude of the rate movements preceding it.


Institutions modeling flat baseline deposit costs in 2023 and 2024 missed a significant component of the baseline interest expense projection. Now that the Fed has started cutting rates again, it makes sense to explore ways to capture the expected baseline rate response so that ALCO understands the potential impact.


Time Deposit Trends


CD pricing continues to be the focal point of our strategic discussions with Deposits360° clients. Institutions have made significant cuts to their offering rates, particularly in the short end of the term spectrum where CD Specials are concentrated. However, DCG’s data shows that the average rate on newly funded CDs is still above 4.00% (4.09%). We also note that within the most competitive offerings (90th percentile), rates have settled within a tight band of between 3.88% and 4.41%, pointing to a market in which high-rate alternatives are beginning to dry up for rate-shoppers.

Source: Darling Consulting Group Deposits360°®


Two CD Metrics to Watch


Deposits360° contains several important metrics that help users better understand balance flows within the CD portfolio. One such metric is CD Rollover, which quantifies the percentage of CDs that roll into the same account upon maturity. CD Rollovers at the Cross-Institution level have been climbing since Q3 2023 when it became clearer that the Fed would pause its rate hikes. There are two main reasons for this trend: 1) rate-shoppers who were initially attracted to a higher yield are finding it more difficult to roll into a higher-yielding product at another institution; and 2) institutions have right-sized CD pricing such that fewer maturing CDs are rolling into a materially lower rate.

Source: Darling Consulting Group Deposits360°®

While rollovers are important to track and understand, today’s rate environment requires that institutions use data analytics to optimize deposit pricing and drive funding costs down while, at the same time, limiting deposit attrition. We tell our clients to pay close attention to CD attrition levels, as this metric represents a true loss of liquidity (i.e., balances leaving the institution). At the Cross-Institution level, attrition has been trending lower. This trend coincides with another clear trend of depositors increasingly opting to move maturing balances into non-maturity deposits.

Source: Darling Consulting Group Deposits360°®


For many institutions, incentivizing CD migration into non-maturity deposits can be a win-win as premium-rate savings and money market accounts are often priced below prevailing CD Special rates and provide pricing flexibility if/when the Fed changes its policy rate. Some institutions are using Deposits360° to target CD-only relationships and offer premium-rate savings accounts, which provide rate incentives for depositors who bring in additional checking account funds. Others are looking for accounts that previously held large checking or savings balances and using their product offerings to claw back some of these core operating accounts.


With market expectations that the Fed could be holding rates above 4% for a significant period, it is crucial that institutions have a complete set of CD and non-maturity deposit product offerings to retain valuable CD customers at a reasonable cost. Now is time to ensure that your institution’s products and pricing are aligned with your strategic initiatives.


Darling Consulting Group will continue to monitor the Cross-Institution data in Deposits360° and bring you insights to generate thoughtful deposit conversations in 2025.


To learn more about how DCG's Cross-Institution Analytics can help drive strategic decision-making, click here.

 

© 2025 Darling Consulting Group, Inc.

Comments


DCG Insights

Stay up to date on the latest from DCG

bottom of page