Justin Bakst (left) and Billy Guthrie (right). Photos courtesy of Darling Consulting Group

Justin Bakst
Executive Director of Products & Solutions, Darling Consulting Group
Industry experience: 25 years
Age: 48

Billy Guthrie
Managing Director, Darling Consulting Group
Age: 40
Industry experience: 18 years

Deposits have become a lot more volatile, and bankers need a better way to understand these liabilities, argue Justin Bakst and Billy Guthrie of Darling Consulting Group. Elevated interest rates and digital banking tools mean customers can move money around faster than ever before. That’s put some banks on hamster wheels of deposit-seeking just to keep up with the churn.

Bakst and Guthrie have together spent almost 40 years at Darling and work on the company’s new Deposit Retention Index project, which aims to give bankers an easy way to understand the pulse of deposit stability. The DRI is a monthly measure capturing the rolling retention of existing deposit relationships for individual institutions, as well as related patterns and trends for geographic regions and the banking industry as a whole. DCG believes it can help bankers, economists and analysts better understand changing liquidity and competitive dynamics for deposits.

Q: What sparked the idea of adding this index?
Bakst: One of the things that’s been on bankers’ minds over the last several years, coming out of some of the bank failures and much higher [interest] rates from COVID is this idea of what is the definition of a core deposit. In the past many bankers thought of a core deposit as a low-cost or no-cost deposit, and we believe that definition needs to change into thinking about the stability and the reliability of that deposit. That has significant implications on liquidity, on interest rate risk, on bank earnings. Just think about how much the deposit landscape has changed in just a few years. Consumers, businesses, municipalities: They can move money quicker than ever before with tech-driven tools that they have. You have a demographic shift happening at the same time. You have the largest transfer of wealth in the history of this country [between Baby Boomers and their children in younger generations].

Given those dynamics, we believe that liquidity challenges around the deposit operating environment remain a big focus item and are an area of opportunity for many, but also concern. One thing we’ve always thought about is you need to consider these deposits in terms of separating what’s an operating account [and] what’s a discretionary account, and understanding that those behavior patterns could change as the environment changes. When we talk to bankers in Massachusetts or really anywhere in the country, and we ask them what’s the biggest challenge that they have in 2026, most are telling us that it’s growing or retaining core deposits.

The index is pretty simple, but we think it can be a leading indicator for what some traditional metrics miss. You can look at deposit trends and call report data and other places, but you’re not going to see disintermediation, or migration, or churn, or any of those factors. You’re just going to see deposits that continue to grow higher and higher.

Q: How do you go about analyzing and collecting the data and how do you come up with the formula to come up with this index?
Bakst: From a data perspective, we have completely anonymized data from 300 institutions going back over a few decades, and we have relationship dynamics built into there as part of our deposit analytics platform, Deposits 360. We have a team of data scientists that look at this data, but the formula itself, we kept it simple on purpose because we want everyone to be able to understand it. It’s really just looking at all of the existing relationships and their total balances at one period of time, which is 12 months ago, and then looking at that one year forward. We have all these other, fancy models that we use for the banks. This one we purposely wanted to keep simple so that everyone involved could see it, understand it and feel comfortable with the results.

Q: What do you think is the most important factor that’s making deposits a little less stable in today’s market?
Guthrie: Obviously, over the last few decades, there’s been a lot of conversation about the idea of technology. Online banks, easier access to moving money online, being able to invest in alternative investments through your phone, and of course, fintech, stablecoin – all these kind of headwinds coming through. It’s also rate-driven. The idea that we went through an environment where, from 2009 through 2020, there was really no rate incentive to go out and move funds and then as rates went over that threshold, like 2 percent interest rates, there became more incentive to move some of that money around. So, all of those decades of advancements all came to a head, particularly as rates were tightening in that 2022 cycle. That’s actually one of the things that I think the DRI is doing a really good job at finding.

Over the last year, despite being in an easing cycle, overall deposit growth in the industry has been fairly muted, especially when you compare it to a typical easing cycle. The positive news is deposits are growing. If retention levels aren’t back to the pre-pandemic levels, what that means is you need to lean into acquisition a little bit more in order to fuel some of your growth needs. If you’re not retaining the same amount from your existing customers, you have to go out and acquire more in order to hit some of those growth returns.

Q: When banks are looking at these findings, how can it inform them and how they look to operate in this deposit environment?
Guthrie: The DRI provides a pretty good idea of the overall liquidity levels and how that impacts deposit trends. From a benchmarking point of view, just over the last month or so, I’ve been able to bring this to some of the clients that I work with on the deposit strategy side. I’ve seen some institutions that have a retention level that’s lower than the industry, but their net deposit growth has actually been higher, and what that means is again that they’ve been super reliant on acquisition. They’ve been bringing in a lot of new big deals, but they’ve been paying up for it. So, that’s been driving their cost of funds to higher levels. It’s been interesting, at least from a starting point, to say, “Hey, what’s happening within your existing customer base, and what are the key drivers that you need to focus in on? Is it a retention problem or is it more of an acquisition type problem?”

Bakst’s Five Favorite Sayings

1. “Culture eats strategy for breakfast.”
2. “Always own the option.”
3. “Be fearful when others are greedy, and greedy when others are fearful.”
4. “Assume the extremes and work backwards.”
5. “You don’t own the relationship without the primary checking account.”

Guthrie’s Five Favorite Ways to Stay Grounded

1. Being a new dad.
2. Going to the beach with his family.
3. Having coffee before the rest of the house wakes up.
4. Making the complex simple.
5. Watching his daughter learn.