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 result from deposits that tend to come from local customers at rates that are more in line with local pricing norms. They also tend to result 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.
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.
Our public funds customers appreciate knowing that when they place their funds through ICS and CDARS, those funds are eligible for FDIC protection beyond $250,000 and earn interest. That benefits them, as well as local taxpayers, as our bank can make those funds available for investment within the community.
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