In 2023, banks moved aggressively into certificates of deposit (CDs) as a practical response to one of the fastest rate increases in decades. Deposits surged 24% in a single quarter, not because CDs became a preferred long-term strategy, but because they were immediately deployable, easy to price, and simple to execute.
Today, more than 13% of total industry deposits are tied up in CDs scheduled to reprice within the next 12 months. As rates begin to shift, the concentration and timing of those maturities warrant a closer look.
Falling Rates Don’t Automatically Help Earnings
There’s a common assumption that when rates fall, margin pressure naturally eases. In reality, that relief doesn’t always materialize—particularly for institutions that leaned heavily on CDs during the rate run-up.
As CDs come up for renewal, they’ll likely reset at lower rates while returns on loans may still be drifting down. Instead of improving margins, that combination can put pressure on earnings just when relief was expected. What looked like disciplined funding in a rising-rate environment can quietly become a headwind as rates decline.
