Five Strategies for the Shifting Deposit Landscape
DCG Insights
Five Strategies for the Shifting Deposit Landscape
When DCG published the 2026 DCG Annual Report at the beginning of the year, we cautioned that even with expectations for lower short-term rates, deposit growth would likely remain muted and competition elevated. More than halfway through the year, that view still holds. What has changed is the shape of the curve, and with it the set of decisions in front of every ALCO.
Term premiums are back. The two-year Treasury, which ended 2025 about 30 basis points below short rates, now sits roughly 75 basis points above those levels, and the upper 90th percentile of CD special pricing is once again above 4% nationally.
Deposit trends reinforce the need to adjust.
Across the bank and credit union users of DCG’s Deposits360°® platform, average deposits are up <2% year to date, while the mix continues to shift toward interest-bearing products.
At the same time, funding cost relief is fading. Total deposit cost was essentially flat over the past 4 months, and DCG’s 12-month base forecast now calls for an increase of about 5 basis points.
With the window for funding cost relief closing, how do institutions manage their cost of funds moving forward?
Source: Darling Consulting Group, Deposits360°® Unless otherwise noted, figures reflect actual data as of July 31, 2026.
From the Editor
Although I only bet on thoroughbred racing one day a year, I love to buy the racing program and pore through the data on all the horses. Raking through the stats trying to find a data point worth risking a wager on keeps me busy the entire day.
I often wonder how people can “bet the ponies” and make money. In effect, I have the same data they do, but I’m not exactly building a fortune doing it!
And that brings me to this month’s Bulletin authored by DCG colleague Billy Guthrie. Arguably, Billy looks at more deposit data for community financial institutions than anyone in the industry. And while he is clearly informed by billions of deposit records, Billy’s ability to distill the data into a winning strategy makes him such a valuable resource for all of us at DCG and the clients we serve.
This month, Billy shares five strategies in the shifting deposit landscape. If you’re looking for a winner, Billy will give you one!
Vinny Clevenger, Managing Director
What the Shift Means for Deposit Strategy
The hardest part of deposit strategy is recognizing when the market has pivoted, and adjusting before competitors force your hand. The answer is not simply to dust off the old rising-rate playbook. Customer behavior, product mixes, and competitive dynamics have changed. Institutions need to understand their own deposit base and determine where and how much they are willing to spend for growth and retention.
Here are five themes that DCG believes institutions should focus on:
1. Bifurcate Acquisition and Retention Strategies
Acquisition and retention are different objectives and should not be priced the same way. Too often, an institution reacts to a high-rate competitor by moving an entire product set upward without first asking whether the goal is to attract new money or protect existing balances.
If the objective is aggressive acquisition, pricing may need to sit in the upper competitive percentiles, but that should come with barriers or guardrails designed to limit cannibalization. New-money requirements, minimum incremental balances, or relationship qualifications can help ensure that premium pricing actually produces new funding. Those limitations also need to be reflected in the product's pricing.
Retention pricing can be more measured. The objective is often simply to narrow the customer's incentive to leave. DCG’s data shows a 40 basis point difference between the rate needed to acquire a new CD and the rate needed to retain an existing rollover, and that spread has begun to widen. Treating those cohorts identically can create unnecessary expense.
A practical decision before moving a rate would be to determine targets for new money vs. cannibalization. Teams should understand the marginal cost of bringing in new funds and create acceptance thresholds before product rollouts become too expensive.
2. Reposition the CD Curve
At the end of Q2, the average CD portfolio term was about 12 months, and 76% of new CD originations were flowing into terms shorter than 12 months, the shortest duration DCG has observed. That was a rational response to the prolonged inverted curve.
However, that has left the average financial institution managing quarterly rollovers equal to roughly 35% of its total CD book. With term premiums returning, institutions now have an opportunity to reconsider that positioning.
The market is beginning to adjust.
Through July, average rates on newly opened CDs were up roughly 10 basis points year to date, but the movement has been uneven: rates at 6 months were up about 7 basis points, compared with 16 basis points at 12 months and 22 basis points at 24 months. Even so, a significant spread still exists between wholesale rate levels and average CD offerings beyond the 12-month point of the curve.
Source: Darling Consulting Group Deposits360°®. Unless otherwise noted, figures reflect actual data as of July 31, 2026.
Customer behavior is responding, as well. From June to July, the share of new CD activity in terms shorter than 12 months fell from 76% to 67%, while activity in 12- to 17-month terms increased from 22% to 32%.
Source: Darling Consulting Group Deposits360°®. Unless otherwise noted, figures reflect actual data as of July 31, 2026.
One practical strategy is to reduce pricing on the shortest terms, where rollover volume remains heaviest, and redeploy some of that cost into mid-term offerings. That can rebuild term premiums, extend funding duration, and begin normalizing maturity ladders without simply raising the entire CD curve.
3. Manage the Product Suite, Not Individual Products
No single product should be expected to solve every deposit need. During the last rising-rate cycle, many institutions relied heavily on CD specials while delaying more competitive savings and MMDA options due to fears of cannibalization. In many cases, meaningful CD cannibalization still occurred, while liquid savings customers had fewer competitive retention options.
Today, the relationship between products deserves closer attention. Industry data show a spread of roughly 145 basis points between average newly opened CD and MMDA rates. Even among more competitive upper-75th percentile of offerings, the spread is still about 95 basis points. That represents meaningful potential cost savings when an MMDA can satisfy a customer's liquidity and yield needs without requiring CD-level pricing.
Source: Darling Consulting Group Deposits360°®. Unless otherwise noted, figures reflect actual data as of July 31, 2026.
As the CD-MMDA spread changes, customer preferences will change with it. Institutions should deliberately manage the relative pricing, liquidity premium, tiers, and relationship benefits across checking, savings, MMDA, and CDs rather than pricing each product in isolation.
4. Compete for Relationships, Not Rate Shoppers
The next rate increase, if it comes, may be more difficult than the last one because deposit portfolios now contain a larger share of interest-bearing balances. Institutions may have less lag capacity than they enjoyed at the beginning of the 2022 cycle.
That makes relationship quality even more important. CD-only relationships in DCG’s data have roughly three times the attrition rate of customers with additional product ties. Premium pricing without a clear plan to deepen the relationship can therefore become expensive very quickly.
Institutions should ask whether high-rate campaigns are creating checking relationships, additional services, or broader wallet share. Relationship-based offers that reward primary checking or broader engagement may grow more slowly, but they can create a more durable and cost-effective funding base.
One easy measurement all financial institutions should incorporate into their monitoring is the concentration of Savings and CD portfolios without checking accounts. This is especially beneficial when tracking new markets or product offerings and can help create accountability for meeting objectives relating to the depth of deposit relationships.
5. Turn Retention into a Growth Strategy
One of the most overlooked opportunities in deposit management is reducing attrition.
Acquisition gets the attention, but slowing runoff and growing from within can be one of the most cost-effective ways to improve net growth.
Practitioners should monitor relationship-level warning signs continuously: large single-period declines, consecutive balance declines, product depth, and relationship tenure among them. The objective is not to create a watchlist. It is to prioritize outreach and give teams a defined response before a relationship leaves.
DCG’s new Deposit Retention Index™ (DRI) adds an important benchmark to that process. Unlike headline deposit growth, it helps expose the churn, migration, and disintermediation occurring underneath stable-looking balances.
Source: Darling Consulting Group Deposit Retention IndexTM, 12/31/2007-7/31/2026. About the DRI: the Deposit Retention Index measures the seasonally adjusted, annualized change in retained deposit relationships and dollars relative to the same point a year earlier. A reading above 100% indicates expansion in retained relationships, while a reading below 100% indicates contraction.
Retention has rebounded from the 2023 lows but remains below pre-pandemic levels, and the DRI has trended down over the past year. That matters because an institution can post strong net deposit growth while still losing relationships and replacing them with higher-cost acquired balances. Comparing internal retention with the DRI separates a retention problem from an acquisition problem.
A reasonable move is to budget retention the way growth is budgeted: if net growth carries a target, retained relationships and dollars should carry one too.
Preparing for the Next Deposit Cycle
The deposit environment is not simply moving back toward pre-2022 conditions. Customer expectations, product mixes, technology, and competitive alternatives have changed, and the next phase of the cycle may widen the gap between institutions that understand their own deposit base and those that are managing through market averages and competitor pricing.
That is where data and analytics can be a tremendous advantage. Knowing which customers are truly rate-sensitive, what it costs to retain versus acquire a balance, and where cannibalization is occurring can help an institution to decide where to compete.
The objective is not to pay less for deposits or to grow faster. Rather, it’s to build precision, which helps protect margin while creating capacity for growth.
The market will continue to change, and the next move may not look like the last one. Institutions that build the analytics, monitoring, and decision frameworks to understand their own customers will not need to wait for competitors to dictate the response. They will move first.
For more insights from Darling Consulting Group, click here.
ABOUT THE AUTHOR
Billy Guthrie is a Managing Director at Darling Consulting Group, where he works directly with financial institution executives to leverage data analytics to support strategic deposit decisions through Deposits360°®, DCG’s proprietary software. In addition to supporting deposit strategy, he also educates DCG’s client base on developing and understanding key deposit assumptions utilized in risk models.