Leveraging the Eyes and Ears of the Industry to Plan for 2026
- Keri Crooks
- 2 days ago
- 8 min read
The breadth of what we did in 2025... let the data talk!
Visit the DCG website, join our annual Balance Sheet & Risk Management Conference in Boston, or just speak with any of us in the field, and you will see the DCG story of expansion, expertise, and coverage across the banking industry:
But the real difference maker is the success of our hundreds of client financial institutions across the country… it is our passion!
I frequently get asked, “Why is DCG different?” While I can point to our employees’ core values that I have seen in full display “growing up” at DCG, or how we have held to our roots as a 100% independent advisor to banks and credit unions, I most often respond with, “We make the complicated understandable.”
All too often, executives, management, and board members at banks and credit unions get overwhelmed with ratios, risk results, regulatory findings, and strategy proposals that are less than clear… and certainly not fully understood.
DCG eats, breathes, and sleeps balance sheet management and continues to grow our relationships across the country.
From the Editor
"And later that night when the ship's bell rang
Could it be the north wind they'd been feeling?"
Gordon Lightfoot
This November marks the 50th anniversary of the sinking of the SS Edmund Fitzgerald. For those uninitiated, the Edmund Fitzgerald was a shipping freighter that sank during a severe storm on Lake Superior while carrying 26,000 tons of iron ore. The tragic incident, which claimed 29 lives, was famously memorialized in a ballad by Canadian singer Gordon Lightfoot.
The lyric above ominously refers to the unexpected gales that generated reported 35-foot waves, which ultimately sealed the fate of the ship just 17 miles from the safety of Whitefish Bay, Wisconsin.
Although shipwrecks were nothing “new” to the Great Lakes shipping industry, one notable fact is that there hasn’t been a single major fatal wreck of a freighter on the Great Lakes since!
In the wake of the incident, significant changes to safety protocols, equipment, and regulations in the shipping industry have positively impacted the safety of the ships and mariners.
Proper planning and preparation are integral to safe passage.
In this month’s Bulletin, DCG Managing Director Keri Crooks writes about the key considerations for financial institutions as they enter the planning season. She shares some insight from the 4,200 unique strategies and the 2,800 stress tests DCG has run so far this year for clients. She notes that, “Forewarned is forearmed: interest rate, liquidity, and credit risk are changing.”
This is a must-read for those planning their institution’s 2026 budget. And from everyone here at DCG, we wish you safe passage in 2026!
Vinny Clevenger, Managing Director
The following are Key Considerations as you enter the 2026 planning season, from the team that sees it all.
Hindsight is 20/20.
Before planning strategies for the new year ahead and preparing budgeting, reflect on what you did right in 2025 and be sure to understand the factors that contributed to those outcomes.
In 2025, through August, DCG ran over 4,200 unique strategies and 2,800 sets of stress test scenarios for our clients. And we still have a couple months to go here in 2025.
That is over 7,000 combined potential strategies and key assumptions stress testing scenarios prepared by DCG consultants and analysts to facilitate strategic discussion and potential market opportunities.
Here are just a few of the modeled strategies that come to mind: Pre-investment of bond cashflows; Loan purchases and loan sales; Interest rate swaps, caps, and floors; -25bp increment rate cuts by the FOMC; Dynamic shifts in asset and funding mix; Growth models; What-if a continued migration out of low cost savings accounts into CDs; New MMDA and high yields savings products; New relationship checking accounts and potential cannibalization of existing accounts; Lower CD rates; Funding extension; Paying down wholesale borrowings; Bond restructuring; Acquisitions; Mergers of equals; Calling brokered CDs; Blend and extend; and Impact of lowering new loan origination rates.
The purpose of building models is not to build models; it is to support decision-making!
Ensure your current strategies and proposals are 1) specifically tailored to your financial institution’s risk profile and appetite (a $100MM notional strategy can be meaningful for one institution but pose too significant a risk for another) and 2) are revisited frequently based on your changing risk position, the current environment, and market opportunities.
Make this a focal point for ALCO meetings in 2026 to keep changing the conversation!
Forewarned is forearmed: interest rate, liquidity, and credit risk are changing.
Market awareness, market insights, and customer trends are other factors that set DCG apart in the banking industry. My DCG colleagues have done hundreds of webinars, podcasts, articles, and speaking engagements surrounding our use of cross-institution data to create current and forecasted loan and deposit intel (by market, asset size, product type, etc.) as well as ongoing credit and CECL monitoring. Just like the season is changing, so are the conversations in the banking industry.
Interest Rates and Liquidity: We have seen an uptick in client requests for help to forecast deposits for 2026 budgeting, and I would expect that trend to continue.
Common deposit questions that are top of mind for DCG clients include:
How will Fed rate cuts and lower deposit rates impact deposit balances in 2026?
DCG has polled hundreds of institutions in recent webinars, asking what institutions are forecasting for growth. Most respondents fell within a band of 0% to 5% growth.
DCG’s deposit volume models are projecting that the recent trend of NMD growth may continue to outpace CD portfolio contraction, resulting in 4.5% total growth over the next 12 months in a baseline scenario (no further change to interest rates).
MMDAs and checking accounts are projected to see most of the expected balance increases at the Cross-Institution level, but clearly, institutions will see varying results depending on internal strategy.
Will the rates paid to retain non-maturity deposits stay anchored at current levels or begin to decline if the Fed continues to ease?
CD portfolios and CD special rates have adjusted meaningfully lower through recent Fed rate cuts, and some institutions are increasing modeled CD betas closer to 100% to reflect current and future CD pricing strategy. However, checking, savings, money market, and other high yield accounts have been lagging and undergoing less pronounced rate cuts, and many models continue to include falling rate betas that suggest meaningful deposit rate cuts would have already occurred and be closely correlated with any future FOMC rate cuts.
With 2026 upon us, be sure to review and reaffirm your falling rate deposit pricing assumptions (betas, as given example) specifically for non-maturity deposit lags and future pricing strategy.
Do I need to be “top of market” to grow deposits?
I often hear pricing and product committees talk about local competitors and how they have the best rates (loans and deposits) and therefore “we need to match.” This assumes you have the same balance sheet needs, goals, liquidity access, risk tolerance, and services.
Remind your team that competitors can easily match products, copy promotions, and even outspend you on technology and buildings.
What they cannot easily copy is a team of engaged bankers who consistently step into their markets, talk with people, learn their needs, and earn their business through action.
Interest Rate Risk: gradual rate cut / soft-landing scenarios are likely not your financial institution’s risk.
DCG cross-institution analysis shows that gradual shifts in interest rates of +/- a 200bp band over 12 months produce NII results within a band of 2-3% improvement or decline, on average, across hundreds of financial institutions.
In the second year (months 13-24 projected), rates moving up by 200bp shows 83% of institutions improving and positive NII pickup. 77% see roughly a 10% improvement in year 2 of a gradual down 200bp scenario. You likely are policy compliant for these rate scenarios and earnings are not meaningfully at risk… BUT don’t let the conversation stop here!
More interesting, within the same data set, more aggressive overnight rate shock scenarios where the FOMC and yield curve move notably lower quickly (-300, -400bp parallel shifts) can result in double-digit declines to projected NII. While the FOMC and markets do not have these scenarios as baseline, be sure to understand the drivers behind your risk of low probability but high impact events and be able to tell your story.
Assumptions are informed estimates that play a critical role in earnings simulations and forecasting. These are most well-known and documented in banking for deposit behavior, bond prepayment speeds, and for replacement of asset and liability cashflows. With 2026 upon us, challenge your team to review loan prepayment assumptions and resulting monthly cash flows within your earnings at risk and liquidity simulations. For many institutions, loans are the largest concentration relative to the size of the balance sheet and typically carry the greatest amount of credit risk and optionality.
I recently had three ALCO meetings in the same pocket of the country. They are similarly sized institutions, and each group has sizeable residential mortgage portfolios on their balance sheets, but their falling rate risk profiles and monthly loan payoffs each looked remarkably different. One team originates non-conforming, higher credit risk mortgages, the second team originates traditional conforming mortgages, and the third is primarily a jumbo mortgage originator… all very different borrowers, with different prepayment behavior throughout cycles.
Loan prepayments do change with interest rates and clearly should vary depending on your specific business lines and customer set. Review your flexibility to vary behavioral assumptions in modeled rate scenarios, and by varying coupon bands, and, of course, be able to support those unique assumptions. Earnings and liquidity projections are only as accurate as the data and behavioral inputs.
Credit Risk and Capital Sufficiency: borrowers are creating additional risk, but it feels like credit quality is just “normalizing.”
Q3 2025 earnings calls and releases from the largest banks reveal souring loans to a variety of credits and a lot of executive anecdotes around credit quality. My favorite commentary was from JPMorganChase’s Jamie Dimon:
“My antenna goes up when things like that happen. And I probably shouldn’t say this but when you see one cockroach, there are probably more. And so we should—everyone should be forewarned on this one.”
JPM wrote off $170 million in bad debt to car dealership company Tricolor in the quarter. Other banks have reported losses to investment funds, bankruptcies, fraud losses, several losses on C&I loans.
Last month, JD Power reported the percentage of new car buyers with credit scores below 650 was nearly 15% in September, or roughly one in seven people. That is the highest for the comparable period since 2016.
The portion of subprime auto loans that are 60 days or more overdue on their payments hit a record of more than 6% this year, according to Fitch Ratings, while delinquency rates for other borrowers have remained relatively steady.
There is definitely stress out there. What is at risk relative to earnings and capital levels? Where on our balance sheet is the risk originating? Why is the risk appearing? How can the risk be mitigated? Ongoing credit monitoring is an objective of high-performing ALCOs.
"Looking through the eyes and ears of the industry" is a metaphor for analyzing and understanding a market from an insider's perspective. The above items are top of mind. With 2026 right around the corner, ensure your team is anticipating these trends and opportunities to change the conversation.
For more insights from Darling Consulting Group, click here.
Keri Crooks joined the DCG team in 2002. She consults directly with ALCO groups and boards of directors at banks and credit unions in the area of asset liability management with the goal of enhancing high-performing institutions. She takes a hands-on approach to developing strategies to best fit the risk profile for each bank’s balance sheet, while also balancing trends and pressures alive in the current industry.
Additionally, Keri remains actively involved in advancing Liquidity360°®, DCG’s proprietary liquidity risk management software, and is a frequent author on balance sheet management topics.
Keri received a B.S. in business administration/finance from the University of Massachusetts at Lowell and currently resides in southern New Hampshire with her family.
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