IntraFi’s all-weather services enable the bank to adapt to different market environments.

The past couple years have been eventful for banks.

That’s putting it mildly.

During the pandemic, most banks were saturated with liquidity from economic stimuli. Some didn’t even want deposits. But just a year later, with the Federal Reserve tightening policy to tame inflation, banks had begun paying up to keep customers.

Then, in March 2023, Silicon Valley Bank and Signature Bank failed within days of each other, and the Fed, FDIC, and Treasury moved quickly to protect customer funds. The Fed also announced the creation of a new emergency lending program. Suddenly, deposit safety had become a chief concern.

These kinds of shifts in the macroeconomic and business environments, to say nothing of institution-specific challenges, can have a significant effect on a bank’s funding needs.

As conditions change, institutions such as The Bank of Elk River must be able to change with them.

Freeing Up Pledged Assets While Protecting Funds

Located in Elk River, Minnesota, about 35 miles northwest of the Twin Cities, the $640-million Bank of Elk River is a family-owned business in its fifth generation. Founded in 1885, it provides integral support to the nearby Sherburne and Wright counties.

Putting the community first means doing right by the bank’s customers, even when large-dollar deposits strain the bank’s liquidity position.

In the early 2000s, approximately 60% of Elk River’s investment portfolio was tied up in pledging collateral for municipal and public-unit deposits. While determined to adhere to its principles of community engagement and customer service, the bank also recognized it needed to free up liquidity.

Then it learned about IntraFi®.

“We reduced the percentage of investments tied up in pledging municipal deposits down to 4% or 5%."

Using IntraFi’s flagship services, ICS® and CDARS®, The Bank of Elk River was able to sell deposits to other institutions in IntraFi’s network that needed funding, enabling it to accommodate large deposits without negatively impacting its balance sheet.

“We reduced the percentage of investments tied up in pledging municipal deposits down to 4% or 5%,” explains LeRoy Lindenfelser, the bank’s CFO.

“We were also able to earn small fees on these transactions, which helped supplement noninterest income when rates were super low. At one point, we had close to $60 million in ICS and CDARS1—around $30 million in each—all off balance sheet.”

The Bank of Elk River also appreciates how IntraFi’s services help the bank protect funds. For public-unit depositors, safeguarding funds is a critical responsibility—especially during uncertain economic times. Failing to do so could have profound consequences.

With ICS, depositors can access millions in aggregate FDIC insurance through IntraFi network banks for cash balances placed into demand deposit accounts and money market accounts, and with CDARS, they can do the same for cash balances placed into CDs—all through a single relationship with The Bank of Elk River.

Note: A list identifying IntraFi network banks may be found here. IntraFi is not an FDIC-insured bank, and deposit insurance covers the failure of an insured bank. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply.

“Access to the FDIC coverage is a very big deal for our public-unit customers,” says Lindenfelser.

Adapting to Different Market Environments

During the pandemic, The Bank of Elk River grew over 40% in an 18-to-24-month period through funds placed as a result of the Paycheck Protection Program.

“We received a ton of deposits during that time, and IntraFi’s services were important in helping us manage our balance sheet and capital position through that growth.” Lindenfelser explains.

Then, in 2022, once the Federal Reserve began raising interest rates, Elk River was pleased to find that IntraFi’s services made it easier to negotiate with customers seeking higher yields.

“As other institutions started to become more aggressive in raising deposit rates, ICS and CDARS made it easy to accommodate rate-sensitive customers on a case-by-case basis without cannibalizing our other deposits.” Lindenfelser says.

“That’s a key tool for us right now, as we’re competing with credit unions and the prevailing rates that are presenting challenges for many institutions in the area,” he adds.

Something else happened in 2022. Loan demand picked up. To fund loan growth and increase liquidity while remaining competitive in the marketplace, The Bank of Elk River used reciprocal deposits to bring back on balance sheet many deposit amounts that had been off balance sheet as a result of one-way placements.

“As easy as flipping a switch,” Lindenfelser remarks.

During a period when other institutions were scrambling to attract deposits, turning to more reciprocal placements enabled the bank to readily increase its on-balance-sheet deposit amounts through deposits from existing customers—an attractive feature, especially considering some of the high-profile bank failures that have occurred of late.

“We were able to improve our funding position internally, while funding our loans at a cheaper level than if we’d used the Federal Home Loan Banks or the Federal Reserve’s discount window,” Lindenfelser explains.

Finally, The Bank of Elk River is also taking advantage of the ability to shift funds from CDARS to ICS.

“We’re structuring our deposits to convert those that may be viewed as too long-term to more short-term in case rates fall, based on the yield curve and looking at how the prevailing markets are behaving,” says Lindenfelser.

Maintaining a Long-Standing Tradition

The Bank of Elk River has been in business for over 135 years; it was actually assigned the first phone number in Elk River. That kind of longevity isn’t a fluke. Over the years, the bank has kept a laser-like focus on its key objectives of exceeding customer expectations, driving growth and shareholder value, maintaining soundness, and providing exceptional customer service.

And with ICS and CDARS in the bank’s toolkit, Lindenfelser and other members of The Bank of Elk River’s executive team are optimistic about the next 135 years, regardless of what challenges the future may bring.

Want to know more?

Find out how IntraFi can help your bank increase balance sheet flexibility.

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[1] Use of CDARS or ICS is subject to the terms, conditions, and disclosures in the applicable program agreements, including the IntraFi Participating Institution Agreement. A list identifying IntraFi network banks may be found at The depositor may exclude banks from eligibility to receive its funds. IntraFi, ICS, and CDARS are registered service marks, and the IntraFi logo is a service mark, of IntraFi Network LLC.