“Dust Off The Falling Rate Deposit Playbook" with DCG’s Bill Guthrie

DCG Deposit Consultant Bill Guthrie joins Vin and Zach on a Fed Decision Day to dust off the deposit falling rate playbook and dive into funding strategies. The trio explores industry deposit trends and what they mean for community institutions, NMD and CD balance and rate expectations, the importance of harnessing your own data, and how to make sure your institution is not “flying blind” if more rate cuts unfold.

For more insights and ideas, visit DCG at DarlingConsulting.com or follow us on LinkedIn.

Transcript

On the Balance Sheet® S4 E_9 Special Episode – “Dust Off The Falling Rate Deposit Playbook” with DCG’s Bill Guthrie

 Transcript

 [Zach 00:16]

And welcome to On the Balance Sheet, Season 4, Episode 9. And we get a special episode today because the falling rate cycle is back on. We're here on a Fed Day. We wanted to try something a little bit different, getting a broadcast out here, aligning with a Fed meeting date and a Fed cut. And it's really the first action from the Fed since last December. And we did an episode last year with our colleague, Frank Farone, and talking about falling rates and plans and what banks and credit unions should be thinking about as the Fed does cut and, kind of, yield curve implications, and we really wanted to rekindle that today. We got Vin here. Vin is, he's battling the flu. So, he's got his flu game today. He's calling in. He didn't want to miss it. Vin, how are we doing? 

[Vinny, 01:02]

Doing terrific, Zach. Looking forward to hearing Billy and his insight. 

[Zach, 01:07]

And we have our colleague Bill Guthrie here today, too. He's going to focus a lot on the deposit side because I know that's where a lot of you are probably wondering or been talking about is what do we do with the fall rate playbook? How are we going to handle the deposit-based, non-maturity CDs as the Fed cuts? And I think one thing, Vin, that I was thinking about, too, and this is obviously - we're not here to predict rates. Things can change on a dime. But I was thinking about last year, and I was going through our episode with Frankie last August/September timeframe and looking at, kind of, the dot plots and the markets. And do you remember, Vin, that last year when the Fed cut 50 in September of ‘24, markets were predicting Fed would be at 3% by the end of 2025. 

[Vinny, 01:51]

Well, yeah, and I think so much of that got kind of put on hold when the new administration came in and started talking about tariffs. So, you know, it is interesting. And now, you know, I guess if you take it out till the end of 2026, now I think you're seeing something like six rate decreases from where we are today, provided they're a quarter a piece. So, you never can tell. These futures markets are never exact. That's for sure. 

[Zach, 02:15]

It's almost the same place though, right? It's almost like you look... this week here, and we're saying we're going to get back down, or sorry, we are saying, we are not saying anything. The markets are saying that 3%, just below 3 is where we're going to end up again. So, it's a little bit of deja vu all over again, but obviously things can change. And the yield curve has certainly been changing, kind of, with that. And so, maybe this is a good starting point here for us to bring Billy on and let him do some talking and less talking out of me and Vin. I think what we want to start with, Bill, is we can run as far and as long as you want on the deposit front. But I think that the questions we've been getting at ALCO, huge focus on deposits. What's been happening? What are we projecting going forward? How are we going to handle certain increments of cuts? So, could you just give maybe a little background of, like, trends you've been seeing up until today with the Fed cutting, and then we can get into after that what we're seeing going forward. But anything on mix changes, pricing, volume, floor is yours. 

[Bill, 03:12]

Yeah, and thanks for having me. Appreciate it. So, I think first, when we talk about like recent trends in this falling rate environment, first thing to recognize is just, like, how unique and I guess different this falling rate environment has been from the past two that we've navigated. I know we talk about this a lot. It's like the last two cycles, falling rate cycles, that we managed essentially went all the way back to zero. And that's not what we're seeing this time around. In fact, where it's unique is we come from that peak, go down 100, and then we stall out for a year and now we kind of re-engage back into this falling rate environment. So, that I think has kind of presented some unique challenges and probably some opportunities on the deposit gathering front when it comes to this falling rate environment. If you look at recent trends – and if you look at recent trends, so I'm going to talk a lot about, like, some industry trends here. I think it's always important to kind of provide a little bit of background of what the source is for that. So, when I talk about the industry, I'm just kind of leveraging the collection of data that we have in Deposits360˚®. So – we have over 300 institutions that give us account-level data from all across the country. Now, I think the benefit of having that benchmark to account-level data is, one, you get more real-time data. So, I think a lot of the trends that we're going to look at or talk about today, they're through August, right? So just a couple weeks old. So, like, if you compare that to call report data, that tends to lag a little bit. The other benefit, too, is like where it's account level, you can start to benchmark against more unique data trends. So, like for example, like just understanding the attrition levels of CD maturities, or what's the difference in behavior between CDs that have multiple accounts versus those that are single source. So that's kind of where it's unique, and I think it's provided some good insights for us to get a better understanding of not only where the industry has been moving towards, but where it's going into the future. So, with that as the backdrop, if we look at year-to-date deposit growth through August, it's about 2.5%. So, I think if you think about historical levels of growth, that's probably still a little bit lower than the average. So, I think there's been a lot of people that probably want to see additional growth or getting back to that normal. The other thing, when you look at the cost benefit, the cost relief, year-to-date we've only seen about 10 to 15 basis points of cost relief year-to-date. And really, the CD side has been doing the heavy lifting. That's where we're really getting the benefit, where you're having higher rate CDs continue to roll down. But that's actually been a story of diminishing returns as well. As you see these CD portfolio rates, they continue to come down. The cost of the maturing CDs come down. And the fact that the average –ffering rates have been plateauing and flattening over the last couple months, has really kind of limited some of that cost relief. In fact, over the last couple months, total deposit cost has run fairly flat. And in fact, non-maturity deposits have gone up a couple basis points, which I think is interesting when you think about being kind of within a falling rate environment. 

[Zach, 06:45]

Billy, why is that? Why – if we're in this falling rate environment, I know there's been a plateau. Why are non-maturity rates a little bit higher? 

[Bill, 06:51]

Yeah, so that is a good question, and it comes really down to mix change. We're not saying that offering rates aren't coming down. In fact, offering rates have been coming down fairly aggressively with some of the falls in rates, but you have changes in mix where, for example, money markets are leading the growth, so they're growing faster than lower-rate checking accounts. The other thing that you're also seeing is, even within the money market portfolios, there continues to be migrations or transition from like lower rate legacy money markets into the more high-yield offerings that we're seeing today. So, I think one thing that, I guess it kind of surprised me, I'm guessing it would surprise a lot of people out there, is, like, when you look at the average cost of non-maturity deposit portfolios over the last year. So, the entire fall, like 100 basis points, that we've seen rates come down before this Fed move, the average rate only came down by around 10 basis points. So, if you think about that relative to a beta, it's like a 10% beta, falling rate beta on non-maturity deposits. You compare that to what you might have in some of your internal forecasting or interest rate risk models, that might be telling a much different story. So, I think this idea between understanding the dynamic nature between deposits and how those evolve in different rate cycles, that's definitely gaining a lot of traction because it is important, like even if you just think about that data point. 

[Zach, 08:29]

And Billy, so what you're kind of getting at is, and for our listeners, like a 10% deposit beta on the way down to me does seem light. But you could have nailed it with, yeah, we cut our savings rates by 5% beta. We cut our checking by nothing because we didn't touch it. And money markets went down 50%. Like we executed on the individual betas. But because the mix shifted to higher cost accounts, like the effective beta we're calling it, on the overall base was only 10. Even if the individual product lines, you could have in theory nailed the pricing side. You just didn't nail the volume component of that. 

[Bill, 09:10]

Exactly. Like the pricing betas could have been perfect, right? Essentially perfect. It's just that idea that some things move over time. And like we probably won't talk too, too much or getting too much of the modeling kind of impact of like static first dynamic. But I think it's, it's evolving conversation, especially if you just think about like the idea of like, I guess, static modeling, right. Is the intent for that is that you don't want to mask risk. The reality is if you look at both the last rising rate cycle that we went through, or even this falling rate environment, like, the static piece, like the non-dynamic, not building in the dynamic mix changes that we've seen in the deposit, they result in effect a masking of some of the risk within those portfolios. 

[Zach, 09:57]

It makes perfect sense. Vin, you get anything on what's been happening before we let Billy go into where he thinks things are going on the projecting side? 

[Vinny, 10:05]

Yeah. And it is a thrill to have Billy, Billy, close friend, and I always kind of make the joke that he's sort of the preeminent deposit consultant in the country. That's a joke we make together. Yeah. But the reality is when you look at Billy and his access to our database and the data he has to inform a lot of our colleagues and so forth, it's really quite impressive. So, Billy, I guess two questions for you. I hate to put you on the spot, but I did call you the preeminent deposit consultant. The first would be that 10% you just referenced, how would that relate to prior cycles? And then, of course, maybe use this as a segue for what your expectations are for maybe, say, the next 100 basis points down. 

[Bill, 10:45]

Good question. I think when you look at, like, prior cycles, if you go back to the 2019 to 2020, 2021, saw that average cost on non-maturity deposits. And I'm just focusing in on the non-maturity deposits because there's a lot more moving pieces on the CD side that we can get into. But on the non-maturity deposits, that probably came down like 30 to 35 basis points relative to 225 basis point reduction. So, you are probably seeing a little bit of a lighter beta that's closer to 10 versus, like say, 15 percent or so on that. So, the pace – like one of the things that we've said, the pace and the magnitude of rates, whether they're going up or down, they do matter to the impact on pricing sensitivity and volume. I think just that lagging kind of component that we've seen as the rates come down and the liquidity component where people still need to grow and you need to – essentially potentially pay up a little bit on that. It's definitely showing the effect on what we've been seeing on costs moving down. 

[Vinny, 11:48]

Bill, in sort of this commonly held, I guess, belief that there's a relationship between falling rates and liquidity at community banking institutions, you start to see liquidity increase. Are we sort of still projecting that as we move forward? 

[Bill, 12:02]

Yeah, I think one thing that's important to understand is like anytime we're talking about deposits and we're talking about balancing the growth and the cost, like, there's always a tradeoff. There's always the option that the financial institution always can control the pricing. However, you can't talk about just like that in isolation. You also have to say, what's the response? How is the customer going to respond in balances? Like that pricing elasticity, that's something that we build models around that. We focus in that a lot. It's like the question shouldn't just be, hey, I'm going to lower my rates by this much. The follow-up question should be what is the potential tradeoff to that? What's going to change in my volume side? And then, looking at both of those options together and saying, well, which is the better for our organization. In fact, is that give up in liquidity in the gain on the margin or the cost side? Do those decisions make sense together? So, I think we're seeing that. And I think, you know, you definitely see it on the CD side. If you think about like some of the CD trends going into this year, like last year, we had about 13% CD growth, like the typical portfolio, that's essentially flat today. And I think one thing that you saw, especially early on in the cycle, when rates first started to come down, saw pretty high betas on CD offering rates. Those rates, they came down, there was a give-up in some of the growth. And then even when you probably thought that CD rates would continue to come down over the last couple quarters, they started to really flatten out. And I think a lot of that was driven by that liquidity impact. Like growth levels weren't where they were. The balances were responding. So, people kind of had to pull back depending on what their liquidity needs when it came to making some of those future pricing decisions. 

[Zach, 13:53]

It makes perfect sense. And Bill, as you look forward here, I know – I think when we try to carve out, hey, the falling rate deposit playbook, redust that off from last year, CDs for a lot of institutions were, you mentioned, right, the number one driver of cost relief? 

[Bill, 14:12]

Yep. 

[Zach, 14:13]

As higher cost maturities that they put on at 23 and 24 maybe are now starting to roll their way through, what are you seeing just generally? Obviously, things are different depending on your market and your strategy, et cetera. But attrition standpoint, 4% seems to be kind of – glass floor. We'll call it for some. I think many have broken it. Others are still a little shy. So, from a retention attrition standpoint and what you see in our CIA database from a pricing, what are you kind of thinking here on that front? 

[Bill, 14:45]

Yeah, I think because of what you've said, most of the cost relief has been on the CD side. A lot of the pricing conversations and the strategy have been on the CD side. So, I mentioned that that growth has kind of flattened out. But what's interesting is if you kind of break down the components of the CD portfolio, like if you look at maturing CDs – and the attrition levels of those, like what's actually leaving the financial institution upon maturity, that's actually pretty stable and low. Like that's still been around 10% or so within the industry level. So, what that means is, essentially, the inverse of that is 90% of those CD maturities are staying within the organization, whether it's staying in CDs or shifting back into non-maturity deposits. So why are we seeing such a meaningful change in the growth outlook? And that's the acquisition side. Saw a lot of new activity on the CD side as rates were going up as there was an incentive to. And that was new funds coming in from other institutions as well as a little bit of shifting from the non-maturity deposit. That's really spiked down. So, like the fact that you don't have the same level of replacement coming in, is why we're starting to see some of that downward pressure on the CD balances. From the rate side, you're right. It has seemed that there's almost been this level around 4% to break through as market rates have kind of plateaued. What I will say is when we isolate some of the trends between the newly acquired CDs that are coming on, it has just got below that 4% barrier. It's probably like right around like 3.90 right now. It's like that's a good kind of benchmark to look at, like new acquisition where new dollars are coming in on CDs. It's right at that 3.90%, but I think you need to look beyond just like the competitive rates and the upper end of the offerings and really start to look beyond that because, like, if you were to actually just isolate the average interest rate of CD rollovers, so like just what's staying on the books rolling over, that's fairly significantly lower at about 350. So, you have about a 40 basis point spread between what it costs or what it takes to bring in new funds on the CD side today and the typical rate of just rollover. So, I think that more importantly, like, than just looking at your local competitors, I think that's things that we should be talking about in pricing committee. Like how do we take advantage of this spread or this delta between what it takes to bring in new funds and just where I need to potentially be on what's coming over? Like, do we have structures in our products or, like, multiple offerings that allow for just retention without bringing in additional either funds or requirements into that versus, like, going up to that upper echelon. 

[Zach, 17:52]

I think that's so critical, and I'd write that down because you hear all the time, Vin, and jump in here because you hear all the time, well, this group is offering 450, 440 and that dominates a conversation sometimes. And I think you're right. You said look beyond; you've got to look beyond that. That's a factor. I totally understand that. I can sympathize and appreciate that we've got to handle those one-offs or two-offs, but I think the point you just made about those differences are really critical. Vin, I'm not sure if you see things in your travels that are the same. But I know I hear it all the time where a meeting can get hijacked pretty quick if because someone's offering 440 and we’re not.

[Vinny, 18:30]

And Zach, I'm thinking about something Billy already said that I'll come back to. But, you know, I think we've said on this podcast before in different discussions that you never want to base your CD strategy on what somebody down the street's doing. There's so many different variables which would influence the way they're pricing their deposits versus the way you're pricing your deposits. But back to Billy's point, you know, he's talking about attrition. If you kind of look at it, nine out of 10 CD maturities is sticking within your institution. And if you know the blended rate is like 350 and Billy's, you know, example, well then at the end of the day that you understand you don't need to be at 450 to hold these deposits because you have all that data. You have that information already at stake. So yes, I think it's just human nature. I've had these conversations as well, whereby folks in deposits, they'll remember the one squeaky wheel that came in and yelled, but they forget about the nine other people who didn't say a boo. So yeah, I think that's a fairly common conversation at these meetings, for sure. 

[Bill, 19:35]

Yeah, I'd say another thing, too, that's important to remember, especially when it comes to like comparing yourself to competitors, like obviously you need to know what competitors are offering, but also recognizing that your customer base is likely different to some extent. So, like other data points, especially like with deposit pricing right now, that I'd be looking at is, like, what's coming off the book in the next one month, three months. Like, what we're seeing in the industry is the average rate that's coming off over the next three months is about 380. That's different. Like some institutions, that's 375. Some is 4%. Like that would be the one focal point that I'd probably have when I'm talking about CD pricing in my next meeting. It's like, hey, here's what's coming off. What is the depositor expecting for the rate given that we are in a falling rate environment? Like what are they looking for? Then also like compare that to what we need to see from – a margin side. What do we actually need to drop these rates in order to keep lowering that cost of funds or potentially to mitigate some of the increases that we're seeing in some portfolios? The other thing is retention is also going to be different based on the institution. I said that attrition level of 10% of maturing CDs are showing attrition on average, but we see significant differences in In CD attrition for, like, CDs that have multiple accounts within the organization versus, like, just CD only customers that are coming due - like CD only customers, we typically see two to three times higher the attrition level. So, like if you're paying above market, you're paying close to wholesale to bring those in and you haven't tied in yet. That relationship and then they’re fair weather friends, like you really probably want to revisit some of that pricing strategy around or just the structure. Like, do you create an incentive to tie in multiple accounts or checking accounts through pricing? The other thing that I think is important, too, on the retention side that I think it makes sense but this is actually something that we build in to some of our pricing models as well is like the idea that a CD that comes to its first maturity with your organization, it's got a higher level of risk. It's going to have a lot higher level of potential attrition, especially if you brought that in at a premium rate. Now, as we get deeper into potentially a falling rate cycle and we see people that are past their first rollover, they're in their second or third, you typically see that attrition level fall significantly lower, like anywhere between half the amount. So, I think that's also, like, when you're planning for your upcoming CDs, understanding those different cohorts that are coming due, that can give you a little bit more indication of how heavy you can go on some of the potential rate reductions. 

[Zach, 22:26]

It makes perfect sense. And I'm visualizing just some of the charts we have where you can see every month the maturity rates, right?  And to your point, seeing where that inflection point is when if you don't cut rates, hey, the Fed's cutting today in September 2025. Expectations are, again, October, December. Let's figure out if we don't cut, where do we start to become a headwind on the cost relief side? Or can we keep moving away? And then every 25, is it a 20% beta? Yeah. I'm sorry, a 20 basis point move, so an 80% beta, or is it going to be nonlinear? Are we going to ratchet up the betas as we go? I think those are important things, and you're starting to dig in. It may not be that simple. Maybe we're going to look beyond it to different touch points and things like that. I mean that's really critical, and we could talk about this for a while longer, but I think, Vin, if you're okay with this, too, as long as we have Billy here for a few more minutes, can you tie back in maybe some things you saw on money market side rates, higher tier money. I know that's where the mix has been shifting. So, anything you want to leave folks with in terms of that strategy, because I know that's been a big talking point in a lot of my meetings, is how do we get more folks out of CDs into money markets? 

[Bill, 23:38]

Yeah, I think we've had a lot of conversations around that, and I think that question makes sense, too, especially if you're saying, hey, like, we were so reliant on this CD growth over the last couple of years and then that's flattened out. If those rates come down, we see it every cycle. CDs kind of the incentive to lock up goes away and then it's like, well, what else? And I think that naturally leads into a conversation on the non-maturity deposit side, particularly on the savings in the money market side. I think one thing that we saw is, like, if you were to look at the average CD, you know, rate to money markets, particularly at like the peak of the rising rate cycle, probably like a 250-basis point kind of delta there. So, I think it's important to kind of have an offering, like offering set that hits all the different pricing points and needs of a customer, especially if you can do that at a discount, right? That's beneficial to cost. Now, as we've kind of gone rate forward and rates have come down 100, 125 base points here, and we've seen a little bit of a lag on the money markets that spread between money markets and CDs has contracted. It's probably closer to 125 to 150 today. So, I think there's two things there. There's still a lot of opportunity to grow at a lower pricing point within money markets. Many times we're seeing even the high tier rates on money markets be anywhere between, you know, 250 to 325, and that's getting some activity. So, I think I would still want to kind of have multiple offerings, right? Maybe a CD, CDs coming down, that money market becomes more attractive. I think the other thing, especially is if you have a gap there, right? If, like, you've been over reliant on CDs, that's been where all your growth is, and you're coming off of these 4% rates and then the best offering is like under 2% today. It's like you have a big gap in your offering. And I think that that's going to be more noticeable, more of a problem, especially if rates just kind of slowly continue to trickle down over the next year. So that's something that I would want to fill. You mentioned with, like, tiering. If you look at the, like, just say the tier between, like, money markets that are 250,000 to a million. There is still like a 75 to 100 basis point delta between those typical offerings. So, if you're out there and you're just offering like a 250 plus and you have like 80 percent of your balances in that, like, you're really not giving yourself the pricing flexibility there. So those are just, like, little simple data points that I think are worth looking into. 

[Vinny, 26:22]

Hey, Billy, quick question in regards to, you mentioned kind of the money market offering as being something that could fit the customer's needs. And I guess you also would have a CD offering out there. I guess one of the things you've seen here now is that so many CDs have shortened up for a long time. That was sort of taboo to get your CDs to four, five, or six months. What is your expectation for CD terms as we start to move forward? Do you think they'll start to push out, or is that more byproduct of the shape of the curve? And also, is there any data that shows a significant cannibalization out of CDs into money markets in the wake of this past cycle where CD specials have been so short? 

[Bill, 27:06]

Yeah, so I think a couple things that you hit on there. I think if you look at average CD term, if you were to look at, like, the average term of a CD portfolio today, it's right around 12 months. If you go back to like 2015, that was closer to like 30, 36 months. So, we're sitting here with probably the shortest CD portfolios from a term structure that we've ever seen. So, I think if you look at that from, like, a strategy, we've definitely had some people that have looked to extend out some of that CD curve. But I think you have to be cautious, like, especially in today's environment where there's an inverted curve. Like, obviously you still have to have discipline about the pricing level and spreads relative to, like, wholesale. So, like, I have seen some institutions that have gone out, like, maybe their short-term CDs were still around, like, 4% or so. But then maybe they've also tied in an offering like a 12 month that's close to, like, 375 to 385. Those rates should probably come down, right, as Treasury has already baked in some of these rate reductions. But, like, that's what we were seeing the past couple of months. And it's like I've seen some activity shifting out. Not all of it, right? Because people are still going to take the rate opportunity. But I think you can do some extension. You just have to make sure that you're not getting locked up into, like, rates that are at wholesale above and get stuck with them. Because, right, it's Murphy's Law. You lock it up, you extend, and then rates are going to come down. There definitely is something to be said, I think, about you do have to be careful about how short you come up on those CDs to an extent that it potentially takes away from some of the value on, like, the money market or the savings, you're definitely going to see as you give up on that lockup period, that people might be more likely to shift between or see them as the same, you know, a short-term CD and a liquid money market. 

[Zach, 29:03]

Yeah. And I think too, there's a, the risk consultant in me sits back and go, I get it. The markets are predicting more Fed cuts and, they were last year, too, and we didn't get the same degree. So, the folks who – like we always say, listen to your balance sheet. I do believe that, wholly, and if you're very asset sensitive, then yeah, I totally understand the impulse to really shorten those CDs up, being mindful of the money market tradeoff and how close those could be. But if you're liability sensitive – It doesn't mean that you should be going four months on CDs, too, because you think rates are falling. You got to think about what fits your profile. Also, I think, Billy, I have some clients who, the distribution of CDs, like, they don't want to have everything coming due in December this year or pick a month. December is a random month, but having a little bit of dispersion amongst the maturity buckets can help too, right, overall. 

[Bill, 30:00]

Especially when there's uncertainty. They're starting to kind of get the benefit. If it's not there, if it's a little bit later down the line, I think getting back to that ladder is something that naturally institutions want to get back to. I think it's just – it's a little tough. I think it all has to be looked at relative to pricing and spreads relative to wholesale. So, I think you can definitely do it, and I'm seeing clients that are having success. But there are ones, like, if you think about it, if you're at, say, the six months at 390 or whatever, and the 12-month is close to like 375, those are essentially the same spreads relative to wholesale. So, I think that's just the important conversation. Obviously, you could potentially start to load up on the longer end, but you'd probably have to do that at a price that you might be a little bit uncomfortable with, particularly if rates start to come down in a more meaningful fashion. So, it's good conversations, and I think a lot of people are talking about that in their pricing strategies. 

[Zach, 31:03]

And you probably can't, kind of, square that circle without wrapping in the wholesale funding markets, which you alluded to with pricing, which I think is important to understand where you are to one-year borrowings or one-year brokered, or you pick your term. But in the wholesale side, right, Vin, it's always a big conversation. For years now, it's been go shorter with your customer base because that's where you're going to get the most effective pricing. If you want to get length on the funding side – it's not going to happen with your customer base for most. To Billy's point just now, you're probably going to go longer and use borrowings, term borrowings, the Home Loan Bank, maybe broker CDs, maybe callable brokers. I think wrapping that into it, like we're just talking for 30 minutes here on deposits, but you've got to wrap the wholesale discussion in here, too, as a barometer and as kind of a sanity check overall to make sure you're having a full comprehensive funding conversation. So, with that, with the wholesale funding piece kind of wrapped into the deposit side, I think we've covered a lot of what folks are thinking through in terms of as the Fed is cutting here, again, what should we be thinking about? How should we be kind of framing the overall discussion? Billy, we really have appreciated your time, but is there anything else from your standpoint that you'd want to leave folks with? And I'll step back and say we probably should have done this at the start, but I mean – Billy speaks with clients throughout the country every day. He's in ALCO meetings. He's in pricing meetings, right? He's in this data every single day. So, I think he definitely sees some things that Vin and I see, but he might go deeper sometimes because he's in a forum that allows that, where sometimes the ALCO doesn't always dig that deep. So, I think whether it is ALCO, pricing, inter-month meetings, anything you want to share, Billy, from your observations here that could help folks as we go into Q4 budget season, more Fed cuts, et cetera?

[Bill, 32:58]

Yeah, I think if you kind of look forward on the deposit side, some of the, I guess, opportunities or challenges is, you know, we talked about it already, like the idea that rates are going back to zero is probably unlikely. So, I think a lot of us are realizing that, you know, going back to more of a passive position on deposit gathering, like that's not an option. We need to continue to be active. And it's also like if you look at some of the surveys within the industry, it's still a key challenge that people are looking at over the next 12 months, even if rates come down. And I think if you think about just the balancing act between growth and cost relief, depending on where your biases are in the boardroom or in the deposit pricing committee, that can actually create some friction, I think, right now. And that will continue into the next year just because that tradeoff that we talked about potentially in order to continue to get deposit growth, you could, to some extent, be sacrificing cost or relief  –  so I think a lot of times there can be some emotion in that decision when you're talking about what is the right move for your balance sheet. And that's – I think that's where really big advocates on like – let's take some of the opinion, right, and the emotion out of these decisions and let's use data to kind of create some sort of source of truth really. I think all stakeholders should be looking at the same series of information or data and having open conversations about what that data means to us because I think that really is going to align those trade-offs and help you potentially make the best decision for your balance sheet and hopefully give you a competitive advantage as we continue to navigate challenging times. 

[Vinny, 34:45]

So very well said, Billy. I obviously greatly appreciate your time today. And the general theme through this whole thing is if you don't have the data to inform your decision making, you're really flying blind. Using gut or perhaps how folks are incentivized, that's not the best strategy for a financial institution to kind of put into their deposit base. So, Billy, thank you so much for joining us. This has been terrific. I think our listeners are really going to enjoy this. There's some real meat on the bone here today. Zach, any concluding thoughts? 

[Zach, 35:22]

No, we appreciate folks listening in on, kind of, more of this, a little more timely. episode, but I do think a lot of these tactics that Billy's talking about, what Vin just mentioned about the data, I mean, these are timeless, right? So, this might be on a Fed Day, and we're thinking tactically. Billy's part about not being passive, the whole data front, having a game plan for these incremental moves here, I think being opportunistic with how the longer end moves. All those things, I mean, Frank said some of these things last year. We'll say them again next year. We've been saying them for a long time, I think. So, I think these are things that are evergreen to an extent. And we are looking forward to the feedback from this, but also getting back to some more of our clients the next few months here that we have lined up, Vin, right, on the calendar. 

[Vinny, 36:12]

That's right. 

[Zach, 36:14[

So, with that, we thank everybody for tuning in, and we look forward to you stopping by on next month's episode. 

[Bill, 36:20]

Thanks a lot, guys. Appreciate it. 

[Dana, 36:35]

On the Balance Sheet is a podcast produced by Darling Consulting Group. All views and opinions expressed by the hosts and guests are solely their own and may not represent those of BCG or the affiliated business. Qualifying any financial or investment references made during the recordings is highly recommended as they may not be reflective of the current markets. More information about Darling Consulting Group can be found by visiting our website at www.darlingconsulting.com or emailing us at info@darlingconsulting.com. Today's music is provided by Michael Ramir and can be found on Mixkit.

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