Deposit Growth Is Slowing. Loan Demand Isn’t. What Bank CFOs Should Do Next

For many financial institutions, the story coming out of Q2 earnings isn’t about credit quality or interest rates, it’s about funding.

While loan demand has remained resilient, deposit growth has slowed considerably. According to the recent Piper Sandler 2Q 2026 Bank Earnings Summary: Key Metrics & Calendar, deposits increased just 0.5% while loans grew 1.7%, pushing the industry’s average loan-to-deposit ratio toward 90%.

It’s a simple equation: loan growth is outpacing deposit growth.

For bank CFOs, treasurers, and ALCO committees, that trend presents both an opportunity and a challenge. Supporting loan growth increasingly depends on having the right funding strategy in place.

Q2 Earnings Tell a Clear Story

Healthy loan pipelines are good news for community and regional banks. But loans require funding, and funding has become more competitive.

As deposits become harder to attract, financial institutions may face:

• Higher funding costs
• Increased competition for deposits
• Greater pressure on liquidity planning
• More scrutiny around balance sheet management

While these dynamics won’t affect every institution equally, they reinforce an important reality: deposits can no longer be assumed to grow alongside lending activity.

Banks that proactively evaluate their funding strategies may be better positioned to continue supporting customers while managing costs and liquidity.

Traditional Deposit Gathering Is Becoming More Challenging

Banks have long relied on a combination of strategies to grow deposits.

Opening new branches, offering promotional rates, expanding relationship banking efforts, utilizing brokered deposits, spending money on marketing efforts, or accessing wholesale funding all remain viable options.

Each approach, however, comes with tradeoffs.

Promotional rates and marketing can increase the cost of funds. Branch expansion requires significant investment. Brokered deposits and wholesale funding may provide flexibility but often carry higher costs or additional regulatory considerations.

None of these strategies are inherently wrong, they simply represent different tools, each with its own advantages and limitations.

Today’s funding environment often requires a broader toolkit than it did just a few years ago.

Bank CFOs Need More Than Competitive Rates

Successfully funding balance sheet growth isn’t simply about offering the highest deposit rate.

It’s about building a funding strategy that balances multiple objectives simultaneously.

Questions bank leadership should be evaluating include:

• How can we manage our overall cost of funds?
• Are we attracting stable, relationship-oriented deposits?
• Does our funding strategy support future loan growth?
• How diversified are our funding sources?
• Are our deposit acquisition efforts operationally efficient?

The goal isn’t simply to gather more deposits. It’s to build a funding structure that remains resilient across changing market conditions.

Expanding the Deposit Strategy

Many institutions immediately think of acquiring thousands of new retail customers when discussing deposit growth.

But that isn’t the only path.

Businesses, municipalities, nonprofits, credit unions, and other institutional organizations often maintain significant operating balances, reserve funds, and excess liquidity that can complement a bank’s traditional deposit base.

Deposit placement partnerships provide one way for financial institutions to access these larger operational deposits while allowing those organizations to maintain the safety, liquidity, and operational simplicity they require.

Rather than replacing relationship banking, these partnerships can supplement existing deposit gathering efforts by connecting banks with organizations actively seeking competitive deposit solutions.

For many institutions, this creates an additional source of funding without requiring major changes to their existing retail or commercial banking strategies.

Questions Every Bank CFO Should Be Asking

As funding conditions continue to evolve, now is a good time to revisit a few key questions:

• Is our funding strategy keeping pace with loan growth?
• How concentrated is our deposit base?
• If loan demand accelerates, where will the funding come from?
• Are we paying enough to remain competitive—or more than necessary?
• Are we leveraging all available funding channels?

The answers will differ for every institution, but asking the right questions today can help avoid funding constraints tomorrow.

Looking Ahead

The current environment is reinforcing a trend many financial institutions have been preparing for: funding strategy has become just as important as lending strategy.

As loan demand continues to outpace deposit growth, banks that proactively diversify how they attract and manage deposits may be better positioned to support continued growth, strengthen balance sheet flexibility, and reduce reliance on higher-cost funding sources.

Rather than viewing deposit gathering as a single initiative, leading institutions are increasingly treating it as a long-term strategic advantage—one that evolves alongside the markets they serve.

Key Takeaways

• Loan demand is currently outpacing deposit growth.
• Funding strategies deserve the same attention as lending strategies.
• Diversifying funding sources can improve balance sheet flexibility.
• Deposit placement partnerships can complement, not replace, traditional deposit gathering.
• Regularly reviewing your funding mix can help position your institution for future growth.

Frequently Asked Questions

Why are banks competing more aggressively for deposits?

Many financial institutions are experiencing loan growth that is outpacing deposit growth. According to recent Q2 industry earnings reports, deposits grew approximately 0.5% while loans increased 1.7%, resulting in a higher average loan-to-deposit ratio. As banks originate more loans, they often need additional deposits to help fund those assets while maintaining healthy liquidity and balance sheet flexibility.

Why is the loan-to-deposit ratio important?

The loan-to-deposit ratio (LDR) measures how much of a bank’s deposits have been deployed into loans. A higher ratio can indicate that a bank is utilizing more of its available funding to support lending activity. While the appropriate ratio varies by institution, rising LDRs often lead CFOs and ALCO committees to place greater emphasis on deposit growth, liquidity management, and funding diversification.

What are deposit placement partnerships?

Deposit placement partnerships connect financial institutions with organizations seeking competitive deposit solutions while allowing those organizations to maintain liquidity and structured deposit protection. These partnerships can supplement traditional deposit gathering efforts by providing access to larger operating and reserve balances without requiring banks to acquire thousands of new retail customers.

How do deposit placement networks benefit banks?

Deposit placement networks can help financial institutions:

• Diversify funding sources
• Access stable operational deposits
• Support continued loan growth
• Improve balance sheet flexibility
• Supplement traditional commercial and retail deposit gathering efforts

For many banks, they become one component of a broader funding strategy rather than a replacement for relationship banking.

Are all banks experiencing deposit pressure?

No. Every financial institution has a unique balance sheet, customer base, and funding strategy. Some banks continue to experience strong deposit growth, while others are seeing loan demand outpace new deposits. The key is understanding your institution’s position and proactively evaluating funding options before they become a constraint.

Are deposits obtained through deposit placement partners considered core deposits?

In many cases, yes. Deposits sourced through deposit placement partners often come from businesses, municipalities, nonprofits, and other organizations seeking a long-term cash management solution rather than a short-term investment opportunity.

Unlike more rate-sensitive funding sources, these deposits are frequently tied to ongoing operating cash, reserve funds, or working capital balances. As a result, many financial institutions view them as a stable component of their overall funding strategy.

That said, whether a deposit is classified as a core deposit depends on each institution’s internal policies, asset-liability management practices, and regulatory reporting requirements. Bank CFOs and ALCO committees should evaluate these deposits within the context of their own balance sheet and funding objectives.

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