Deposits360°® Monthly Industry Review
- Andrew Mitchell
- 18 hours ago
- 3 min read
This month’s Review highlights notable trends and projections in DCG’s Deposits360°® Cross-Institution Analytics database and deposit pricing and volume models.
The Best Laid Plans…
When the Federal Reserve cut its policy interest rate by 50 basis points last September, institutions were anticipating a sustained falling rate environment under which they would be able to lower deposit costs while building back meaningful deposit growth. In fact, some institutions began proactively lowering their premium rate offerings in advance of the first cut and continued to grow deposits. When the Fed made two additional 25bp cuts in Q4, we saw further rate reductions materialize.
We are now five months into 2025, and with no additional rate cuts, institutions are realizing that 2025 is not exactly playing out according to expectations. Deposit costs are losing downward momentum and CD portfolio growth has stalled. In fact, the back-half of 2025 may end up being one of the most challenging periods in which to manage deposits. How will institutions meet budget forecasts in an environment where funding cost relief is drying up and competition for new deposits is becoming more intense?
To better understand current deposit dynamics, let’s first look at recent rate activity. It may be counter-intuitive to some, but DCG has observed an overall increase in non-maturity deposit costs at the Cross-Institution level over the last month.
Source: Darling Consulting Group Deposits360°®
The chart above shows that all major non-maturity account types either stayed flat or inched higher as depositors shifted or added funds into higher-yielding products, offsetting the impact of recent incremental rate reductions. Newly funded CD rates fell by only 1bp over the last month. In effect, institutions are still clinging to the 4.00% level, particularly within their highest-priced CD Special offerings.
Source: Darling Consulting Group Deposits360°®
There is another dynamic that some institutions have not appropriately accounted for in 2025. For the last couple of quarters, banks and credit unions have been able to roll CD maturities into lower-costing CDs. However, given the short-term nature of recent promotions, the spread between rates on maturing CDs and newly opened CDs is closing quickly, contributing to the flatter trajectory of CD portfolio costs. Any remaining cost relief within CD portfolios is expected to potentially play out over the next two quarters and wane later in the year.
Balance Growth Remains Uncertain
Non-maturity balances grew by nearly 1% over the first quarter of 2025. However, the data indicate that deposits typically see a lift in the February/March period as seasonal consumer and business deposits flow into the banking system.
Source: Darling Consulting Group Deposits360°®
NMD portfolios typically grow in falling rate cycles, but the market is not currently pricing any further rate cuts until September. If this plays out, where will NMD growth come from? Migration from CDs will certainly play a role. Therefore, it is vital that institutions understand the level of CD-to-NMD migration that is currently taking place. Users are relying on Deposits360° to answer this question.
Deposits360° Balance Forecast
DCG is developing a CD Forecast module in Deposits360° which will enable subscribers to complete the deposit picture and forecast total portfolio balances and rates in any given rate scenario. At the Cross-Institution level, the CD forecast (still in beta testing) is calling for overall contraction in 2025. The degree of contraction will depend on factors such as the future path of interest rates and the offering rates on newly opened CDs going forward.
On the non-maturity deposit side, NMDs are projected to grow another 4% through the end of 2025 (6% over the next 12 months). This inflow will be partially mitigated in an environment where the Fed reverses course and raises rates by 100bp.
Source: Darling Consulting Group Deposits360°®
The degree to which institutions keep premium rate CD offerings elevated in the high-3% to low-4% range will surely impact NMD growth, and migration from CDs to NMDs will vary across institutions. At the Cross-Institution level, DCG expects total deposit growth may be in the 2% to 4% range over the next 12 months.
Resetting Expectations
Despite optimistic expectations, 2025 is turning into another challenging year in deposit management. Rate relief is slowing and CD balances are becoming harder to grow as competitive pricing converges near the 4% handle. Total deposit growth at the industry level may likely be lower than many anticipated. On the bright side, the industry is growing NMD balances again, and this growth is projected to outpace time deposit outflows over the rest of 2025. Those institutions that leverage data to drive strategy will be in the best position to meet budget goals.
Darling Consulting Group will continue to monitor the Cross-Institution data in Deposits360° and bring you insights to help you navigate the current economic environment.
To learn more about how DCG's Cross-Institution Analytics can help drive strategic decision-making, click here.
© 2025 Darling Consulting Group, Inc.