Last Wednesday, the Federal Reserve announced that it was cutting interest rates by a quarter of a percentage point for the third time this year. 

Those cuts, of course, tend to make borrowing money cheaper. But they also make saving money less lucrative. Even so, a recent report from the Federal Deposit Insurance Corporation found that while the Fed has been cutting rates, deposits at banks have actually been growing.

At Sunrise Banks in Minnesota, deposits started picking up about a year ago.

“As the year has moved on, we’re seeing a more steady increase in terms of both consumer and small business deposits coming back into the bank,” said Sunrise Banks CEO David Reiling.

Reiling said back when interest rates were rising over the previous few years, many customers moved their money out of their checking and savings accounts and parked it in other investments offering higher yields, including money market accounts and stocks. But now that rates are falling, those plain-old bank accounts are getting more attractive.

“As rates come down, banks are a little slower to follow, they’re grabbing some of those deposits back, they haven’t lowered their interest rates as quickly as rates have come down in the market,” he said.

Reiling said another reason deposits are up at his bank is that his customers want to ensure their cash is safe, and that they can get at it easily — especially his small business customers.

“They’re managing their cash flow in a softer environment, and they’re keeping their working capital readily available,” he said.

Many business owners feel like they should have more cash readily available, said David Schiff, senior managing director at FTI Consulting.

“Companies that are more focused on the retail and the consumer side are very much looking at the continued impact of tariffs, uncertainty around consumer demand, what may be happening in the economy in terms of employment,” Schiff said.

Banks are looking at all of that, too. As a result, Schiff said many of them have been reluctant to use those deposits to make loans.

Julie Hill, dean of the University of Wyoming College of Law, said banks have a few other ways to use those deposits. For one, they can park the money in short-term Treasury securities.

“Especially if they think there’s uncertainty, they gravitate to shorter-duration, lower-yield investments, because that allows them to change course when they have a better idea of what they think might be happening in the marketplace,” Hill said.

Hill said banks can also use those deposits to help them expand — maybe open up new branches, or buy another bank. In fact, bank mergers and acquisitions hit a four-year high in the third quarter, according to S&P Global Market Intelligence.

“Some of that might be driven by the idea that that’s the best place for banks to deploy resources now, that that’s better than what they’re seeing in the loan market, and that’s better than what they’re seeing in investment portfolios,” she said.

Banks are still making plenty of loans. Brad Bolton, CEO of Community Spirit Bank in Red Bay, Alabama, said many of his clients want to borrow more right now to take advantage of lower interest rates. 

“Commercial customers are more apt to say, ‘OK, we’re kind of in a new normal here. Rates are falling, but they’re not going to fall quickly, so let’s go ahead and let’s make this investment, let’s refinance this debt,’” Bolton said.

But many banks are also being picky about the kind of lending they want to do. Sunrise Banks’ David Reiling said he’s being more cautious about lending to any business that’s exposed to tariffs. He’s also being more careful about consumer lending.

“We do see, particularly on Main Street, some of the credit quality has slipped some, and as a result, that safety component is very important,” Reiling said. “If you run a bank, one bad loan equals a hundred good loans in terms of the returns, so you’ve got to be very careful in terms of how you’re lending that money out.”

Reiling said if an application isn’t a slam dunk, the bank is going to take its time figuring out whether it’s worth it to approve the loan.