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    Testimonials

    Reciprocal Deposits


    [Section 202 of S. 2155] gives Empire State Bank a powerful new tool to compete with the largest institutions for the deposits generated by small professional offices. It provides a way for Empire State Bank to attract new, valuable customers—customers that not only have sizeable deposits, but who can act as a referral source to other customers for our lending and other services. It also gives the bank a tool for managing liquidity.
    Phil Guarnieri
    CEO
    Empire State Bank

    Reciprocal deposits are popular because they tend to be associated with multi-million-dollar depositors, enabling banks to attract deposits in large chunks with lower acquisition and maintenance costs as costs tend to be spread over much larger deposit amounts,
    Moreover, they tend to come from local customers at rates that are more in line with local pricing norms. They also tend to come from customers who are more likely to be interested in a broader, more long-term relationship that may include mortgages, credit cards, and other profit-generating services.
    Mark Thompson
    President
    CenterState Bank

    [Reciprocal deposits] have been a key driver for us in the last several years.

    We’ve been able to drive the wholesale brokered deposits down and substitute [them] with [reciprocal deposits]. The big difference that I see, in addition to just sheer volume, is the pricing. Wholesale pricing is a lot higher. You can drive and price these deposits the way your market [commands] and the way you would your other pricing decisions.

    [Pricing] is something that doesn’t get spoken a great deal about when we’re looking at [utilizing reciprocal deposits like] the Insured Cash Sweep or the CDARS [services]. You’re pricing these deposits and trying to win over these larger clients, but it’s on your terms rather than a wholesaler that says, “Well, this is the price for today—the all-in cost.

    I think that’s really huge for a community bank that relies a great deal on their net interest margins because their fee-based activities are a smaller part of their overall profitability model. So it’s not just the funding…it’s also the ability to manage the pricing.
    In stark contrast to listing service deposits, reciprocal deposits help a bank build franchise value. Quite simply, reciprocal deposits tend to be large, lower-cost, in-market deposits and, as such, offer greater potential for opportunity and efficiency. For this reason, many banks are replacing at least a portion of their listing service deposits with reciprocal deposits.
    Jim Di Misa
    EVP and COO
    Community Bank of the Chesapeake

    We think the change to reciprocal deposits is great. It clarifies the status of reciprocal deposits and alleviates the concerns many community banks had about using them.
    Christopher Cole
    Executive Vice President and Senior Regulatory Counsel
    Independent Community Bankers of America

    The definition of brokered deposits needs to be modernized, and we appreciate that Congress took a first step by recognizing reciprocal deposits are a stable source of funding for many community banks.
    American Bankers Association Spokesperson

    This [the change in the regulatory statutes regarding reciprocal deposits] is one of those areas that reflects what bankers always thought was true—when a large, local depositor does business with us, any deposits above the $250,000 FDIC insurance threshold shouldn’t be considered brokered, or highly volatile, just because we place them with other institutions on a reciprocal basis.
    Neil Stanley
    President of Community Banking
    TS Banking Group

    Section 202 made it much easier for us to draw in public funds from local government entities. This allows the bank to divert this additional liquidity to loans rather than purchasing collateral to secure those public funds.

    Reciprocal deposits help us better manage our balance sheet. We can more easily determine what to do with excess liquidity and easily follow through on those decisions which lowers our cost of funds and increases our profitability.

    Most importantly, reciprocal deposits give us another way to further our support for our communities.
    George Musselman
    SVP and CFO
    TransPecos Banks

    Reciprocal deposits are an important piece of our expansion strategy, and I can someday see us bumping the limit of the lesser of $5 billion or 20% of total liabilities, in part because they are a great tool for attracting municipal funds.
    Thomas E. Bates, Jr.
    President and CEO
    Legends Bank

    [Sec. 202 of S. 2155] is a step in the right direction. It makes it easier for community banks to accommodate large depositors.
    Bert Ely
    Principal
    Ely & Company

    Since [S. 2155] was passed…we reached an agreement with a trustee that will at least double our current amount of reciprocal deposits outstanding. The economy of Georgia is roaring back, and Calumet Bank is helping to add to the rebound. Section 202 enables us to add even more.
    Calumet Bank joined the Promontory Network so we could provide [two depositors] access to full federal deposit insurance coverage through reciprocal deposits. We learned that reciprocal deposits were a way to meet the needs of these two depositors, and we reasoned that they could also be used to attract new depositors who wanted [access to] full [multi-million-dollar] federal deposit insurance coverage.
    Lenny Bateman
    President and CEO
    Calumet Bank