Your “One Key Idea”: Highlights from DCG’s 41st Annual Balance Sheet & Model Risk Management Conference
- Geof Kelly
- Jun 23
- 9 min read
Updated: Jul 8
In a time defined by uncertainty and volatility, DCG’s 41st Annual Balance Sheet & Model Risk Management Conference explored how institutions can navigate complexity with confidence.
President & CEO Matt Pieniazek opened the conference with a quote: “Things that never happen, happen all the time,” and warned the crowd against assuming away the unexpected. Central themes of his remarks were the critical role of data in driving strategic clarity, maintaining a questioning mind, and “listening to your balance sheet.” Over the course of the next two days, sessions underscored a shared commitment to transforming unpredictability into opportunity through data-driven strategies.
As always, Matt reiterated DCG’s primary objective for attendees: to walk away with “one key idea” for their institution.
Here are the highlights from this year’s conference.
Pre-Conference: Data Analytics
A Pre-Conference Workshop (Data, Data, Data: The Ultimate Confidence Builder for Risk Assessment and Strategic Balance Sheet Management) set the tone for the days ahead with a dynamic exploration of how institutions can transform data into compelling stories that drive strategic impact.
Speakers emphasized that in a world overflowing with information, the ability to distill insights and communicate them effectively is more critical now than ever. Participants were guided through the full data “storytelling” journey: beginning with thoughtful data collection and preparation, moving through meaningful analysis and visualization, and ultimately culminating with strategic decision-making.
DCG consultants drilled deeper into deposit- and loan-specific data. Deposit discussion focused on relationship analysis, forecasting pricing elasticity and growth, tracking cannibalization and retention trends, as well as the importance of understanding marginal cost of funds. Loan discussion explored prepayment analysis (prepayments vs. modifications vs. curtailments), pricing dynamics (spreads and related dispersions), the importance of understanding maturity/repricing activity, and forecasting loan growth.
For those interested in “looking under the hood,” the Pre-Conference was a terrific opportunity to explore emerging analytics technology, see real-time data, and learn how institutions are leveraging it to make decisions.
Liquidity and Alternative Funding
As the main event got underway, several sessions examined “the new world order” for defining, measuring, and managing liquidity and the impact on loan strategy, deposit pricing, investment/wholesale strategy, growth capacity, and earnings. The convergence of operating and contingency liquidity has changed liquidity management forever, and highlights the critical importance of collateral management.
Sound liquidity planning involves continuously evaluating internal and external factors that could impact cash flow and funding availability. Rigorous stress testing helps institutions model potential adverse scenarios and understand the limits of their liquidity buffers when under pressure.
Being able to identify how much liquidity an institution has access to must be granular: How much can it obtain down to the hour, day, week, month, and beyond.
Beyond monitoring and testing, proper liquidity management also hinges on well-defined policies and contingency planning. These frameworks guide decision-making during both normal operations and crisis situations, ensuring there are defined triggers, escalation procedures, and fall-back funding strategies in place. Implementing these practices can help ensure institutions are better equipped to remain agile, stable, and prepared to face volatility.
Lending/Credit
In the “Lending in a Time of Uncertainty and Volatility” session, DCG emphasized that in today’s environment, successful lending strategies go beyond focusing on rate. Structure, risk, and the embedded value of options all play critical roles in managing the lending function, including pricing strategy and philosophies. Their analysis focused on the importance of understanding structure: prepayments, caps/floors, coupon bands/vintages, repricing spread discipline, and projected cash flows – each of which has strategic implications that can either protect or erode value depending upon how institutions employ them.
Presenters encouraged attendees to think holistically about pricing, and to use both market intelligence and internal data to strike a balance between competitive offerings and prudent risk management. They also cautioned against relying on legacy spreads in today’s environment to ensure adequate compensation for potential risks taken (cost of capital is high, cost of liquidity is high, credit risk is elevated).
As institutions navigate economic uncertainty (particularly around credit), aligning pricing strategies with risk appetite is critical, while balancing the need for preserving existing relationships and attracting new ones. By better incorporating lending-related discussions into ALCO, institutions can better position themselves to serve clients while managing risk and optimizing earnings.
Aaron Jodka, National Director of U.S. Capital Markets at Colliers, provided an update on current market trends. Deal volume has stabilized with institutional investors engaging in more buying and selling. A main focus for many will be the forthcoming wall of maturities, with the sentiment of “Survive ‘Til 25” pivoting to “Stay In Mix ‘Til 26”. With approximately $2.9 trillion of loans maturing through 2029, many 2025 maturities are skewed towards extensions. Given that uncertainty is still present, deal activity may stall until more clarity emerges regarding policy.
Presenters from Stifel delved into capital-efficient loan-related investment and purchase transactions in the current environment. The session highlighted commercial real estate optimization using a special purpose vehicle. They also shared pertinent examples of loss earnback trades to demonstrate the potential value in restructuring legacy, low-yielding investment portfolios.
Deposits
Deposit sessions took a deep dive into recent trends, highlighting pricing elasticity and marginal cost of growth dynamics. Noteworthy takeaways included the fact that the pace of deposit cost relief is slowing, particularly as it pertains to CD portfolios.
Deposit “specials” may be losing their luster as the industry is starting to see prudently structured money market and savings programs attract deposit activity.
DCG hosted a case-study session led by guest presenters from Digital Federal Credit Union (DCU) and Centreville Bank. This discussion highlighted notable best practices for turning insight into action in managing a deposit franchise. Presenters shared success stories about implementing data and technology with DCG’s Deposits360°® solution to measure the execution of promotional campaigns, identify underlying customer trends, and properly position both non-maturity and CD products to drive growth.
Peer Group Discussions
Over the Annual Conference’s 41 years, the peer groups (which place attendees in breakout rooms with similarly sized institutions) have consistently been a crowd pleaser. Participants get a chance to “pick each other’s brains” and understand the experiences of peer firms as well as the pros and cons of specific strategies.
This year, many of these discussions addressed the challenges of deposit gathering / retention / pricing. Most conceded that while deposits have generally “stabilized,” they didn’t feel like they were out of the woods just yet.
Another consistent takeaway from the peer discussions centered around a variety of issues impacting loan pipelines. Obviously, with all the uncertainty both customers and lenders face, higher market rates, declining values, etc., etc., most institutions acknowledged that they are concerned about loan growth targets.
Some attendees commented that they might actually look to the investment portfolio if loan demand remains tepid. While loans are clearly preferred, some mentioned that perhaps given the drawdown on investment portfolio balances to fund loans over recent years in concert with loan contraction, it may make sense to replenish and/or pre-invest a portion of expected cashflows.
M&A
Kelly Brown of Patriot Financial Partners discussed her perspective on today’s M&A environment through the lenses of both private equity and community bankers. She noted that M&A conversations are accelerating for a variety of reasons, including difficulty attracting low-cost deposits, climbing regulatory and operating costs, shareholder push for growth and returns, and widening technology and talent gaps.
Strategic reasons for considering M&A include scaling operations, diversifying income streams, expanding market reach, and addressing succession challenges.
Kelly highlighted some of the key drivers of value creation, including: core deposit strength, fee income diversification, operational efficiency, strong credit culture and underwriting discipline, digital and technology investment, forward-thinking management teams, and proactive capital management.
Model Risk Management
MRM sessions explored the growing complexity of models and the critical need for disciplined oversight to ensure accuracy, reliability, and regulatory compliance.
Presenters focused on ensuring that foundational elements are in place, including ensuring high-quality data, a sound architectural framework that promotes transparency and flexibility, rigorous assumption management to ensure models reflect both current and future expectations, as well as prudent governance and ongoing monitoring practices. They emphasized that models require continuous validation and recalibration as market conditions evolve. With regulators placing increased scrutiny on model governance, attendees were encouraged to treat model risk management as a strategic function rather than a compliance exercise to help promote informed and reliable decision-making across the entire institution.
In the “Right-Sizing Model Risk Management” panel, Horizon Bank and Texas Partners Bank demonstrated how their institutions put these elements into practice.
DCG quantitative consultants provided insights into how to develop an appropriate CECL ongoing monitoring framework, and how understanding model mechanics and limitations is essential to help ensure institutions have reasonable and supportable forecasts. Sessions discussed relevant current trends, the importance of ensuring the sufficiency of reserves, and aligning model output with overall risk appetite.
Two informative DCG sessions about large language models and key considerations for institutions embedding artificial intelligence in operational workflows brought the world of AI to life in an interactive and fun way. Attendees “stepped into the world” of how AI works, and very much enjoyed the brief journey.
Hedging
Chatham Financial provided an update on current trends in the use of derivatives and related strategies. The utilization of derivatives has notably increased within the community banking sector in recent years. They explained how the highly unusual inverted yield curve environment was a catalyst for many institutions to utilize derivatives for the first time. Chatham also provided examples of how derivatives can be prudently used to help manage interest rate risk and support lending strategy (loan growth opportunities and pricing flexibility).
Chatham also reminded attendees about the importance of preparedness, because markets don’t wait for bankers to decide. In this regard, they emphasized upfront education, policy formulation, and accounting/documentation. They also suggested test runs of potential derivatives strategies as a ‘walk-through' to help ensure appropriate awareness and readiness.
Economist Chris Low
Chris Low, Chief Economist of FHN Financial, opened the final day of the conference with his views on the US economy and the path of the Federal Reserve’s monetary policy, considering ongoing market volatility.
Chris noted that the current administration has reversed its “order of operations” in relation to its first term in the White House. He said this time around we are having “dinner before desert,” as the challenges of tariffs, budget reform, immigration reform, and tax policy are all simultaneously being worked on in 2025, only to see regulatory relief and the prospect of lower interest rates (provided if inflation stays low) as we move into 2026.
The discussion focused on trends influencing components of the Fed’s dual mandate of inflation and unemployment. Solid job growth continues, primarily led by the services sector. Unemployment remains little changed in recent quarters, though the effects of immigration policy have yet to play out. Though inflation slowed before the implementation of tariffs, FOMC participants are wary and may remain data-dependent in the short-term as it relates to policy.
Chris said he would not be surprised if the FOMC remains on the sidelines through year end, and predicted that the economy would have a “soft landing with some bumps along the way.”
Ask the Consultants
Back by popular demand, conference attendees had the opportunity to ask questions to a panel of DCG consultants during an open-forum general session. The panel covered a wide range of topics, including deposit strategy, CECL modeling/monitoring, liquidity management and stress testing, investment strategy, what makes for an effective ALCO process, and more.
One attendee asked the panel to opine on whether they expect a “hard,” “soft”, or “no landing” scenario.
While some panel participants cited that a version of a “hard landing” might be the most consequential scenario, they stressed that institutions must understand their current risk posture and how they might respond across a full range of scenarios. Given current volatility and the fact that no one has a crystal ball to aid in forecasting rates, much of the discussion centered on why institutions should listen to and take direction from their unique balance sheets…and to be prepared for the unexpected.
When asked to predict what the theme of next year’s DCG conference might center on, responses varied.
Model risk management is likely to remain a focus point. Institutions must establish a strong, flexible framework to support strategic decision-making, especially during times of elevated uncertainty.
Emphasis on deposit gathering is also likely to remain. In the event of a lower rate environment, institutions may not experience the same degree of historical deposit inflows back into their organization from other market alternatives.
Given the wall of maturities/repricings and potential credit implications, one could argue that loans may be the focus. Pricing discipline and being proactive as it relates to managing borrower relationships and credit challenges could prove paramount.
I hope you enjoyed my summary of this year’s 41st Annual Balance Sheet & Model Risk Management Conference in this month’s Bulletin. The topics were timely and the conversation lively. For those who couldn’t attend, we hope this summary helps you find at least “one key idea” to bring to your next ALCO meeting.
Please mark your calendars and join us next year in Boston for the 42nd Annual Balance Sheet & Model Risk Management Conference on June 8-9, 2026.
Contact DCG to learn more about any of the topics from this year's conference or how to join the discussion next year.
ABOUT THE AUTHOR
Geof Kelly is a Director at Darling Consulting Group. In his role, he works with banks and credit unions throughout the country to improve the effectiveness of their asset/liability management (ALM) process. He collaborates with management teams to craft institution-specific strategies designed to enhance financial performance while navigating interest rate, liquidity, and capital risk management within the dynamic economic and regulatory landscape.
© 2025 Darling Consulting Group, Inc.
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