Strengthening Franchise Value: Community Banks’ Growing Use of Reciprocal Deposits

By Joseph Hooker, Chief Sales Officer, IntraFi

Deposit competition remains fierce. According to IntraFi’s latest survey of bank executives, 93 percent say they expect deposit competition to remain at current levels or increase over the next year.¹ To stay competitive in the current environment, community banks need every tool in their arsenals to attract and retain large-dollar depositors.

A reciprocal deposit network, which enables banks to attract and retain loyal, franchise-building customers by offering access to multi-million-dollar aggregate FDIC insurance across a bank network, is one such tool. Per recent research published by the Federal Reserve Bank of Dallas, reciprocal deposit networks get an outsized share of deposits from small and midsized banks.

“Reciprocal deposits represented 6.47 percent of total deposits for banks with less than $10 billion in assets in the first quarter, up from 6 percent at the end of first quarter 2024. Among institutions with assets of $10 billion to $100 billion, such deposits accounted for 6.2 percent of total deposits as of March 31, 2025, down only slightly from year-end 2024 but up from 6.1 percent at the end of first quarter 2024.”²

Why Are Community Bankers Increasing their Use of Reciprocal Deposits?

Use of reciprocal deposits saw a significant uptick after 1) the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, which recognized most reciprocal deposits as nonbrokered deposits, and 2) bank failures in the spring of 2023. Since then, small- and midsized banks have maintained their heightened usage patterns.

Per the 2018 Act, reciprocal deposits held by an FDIC-insured depository institution are reportable as nonbrokered if the bank is well capitalized and has received an “outstanding” or “good” on its most recent examination; and the total amount of reciprocal deposits held does not exceed the lesser of $5 billion or 20 percent of the bank’s total liabilities.

With this new (in 2018) characterization of reciprocal deposits – and because reciprocal deposits tend to be lower-cost deposits that come in large increments from local customers – more banks embraced reciprocal deposits as an attractive option for growing franchise value.

Then, the high-profile bank failures in spring 2023 drew attention to the risks for bank customers who have cash balances greater than the FDIC-insured maximum of $250,000, thereby increasing demand for large deposit safety. A survey of bank executives at the time revealed that 68 percent of respondents experienced an uptick in inquiries about the safety of their deposits.³ The awareness that uninsured deposits pose a risk to bank customers increased after the 2023 banking crisis and has remained sporadically in the news, with various news outlets reporting on how customers can protect their cash balances over $250,000. Reciprocal deposit networks are usually featured in these articles as they offer the convenience of managing one bank relationship to access insurance across many banks. As a result, more customers know to ask for access and more banks proactively offer the services to strengthen relationships with high-value customers.

Good for Banks and Communities

As more community banks utilize reciprocal deposits, they realize how nicely reciprocal deposits dovetail with their community missions. With reciprocal deposits, the full amount of funds placed can stay local to support community lending. This has special appeal for community banks that by design exist to help their communities grow and thrive by lending to local customers. Community banks play a vital role in local economic stability and growth. By using reciprocal deposits, banks can expand their lending capacity for their local customers, creating a virtuous cycle of mutual success.

Deposit placement through ICS is subject to the terms, conditions, and disclosures in applicable agreements. IntraFi is not an FDIC-insured bank, and deposit insurance covers the failure of an insured bank. A list identifying IntraFi network banks appears at  https://www.intrafi.com/network-banks. Certain conditions must be satisfied for “pass-through” FDIC deposit insurance coverage to apply.

¹ IntraFi Q3 2025 Bank Executive Business Outlook Survey. https://www.intrafi.com/press-insights/research

² Docherty, Christine, and Alessio Saretto. “How Do Reciprocal Deposit Networks Interact with Deposit Insurance?” Federal Reserve Bank of Dallas, accessed August 27, 2025. https://www.dallasfed.org/research/economics/2025/0805.

³ IntraFi Q1 2023 Bank Executive Business Outlook Survey. https://www.intrafi.com/press-insights/research

About IntraFi

Since its founding over 20 years ago, IntraFi has been chosen by over 3,000 financial institutions. IntraFi’s deposit network is the largest of its kind, and its tested, trusted services help its network members acquire high-value relationships, fund more loans, and seamlessly manage liquidity needs. IntraFi invented reciprocal deposits and is the #1 provider of deposit placement solutions, offering the largest per-depositor, per-bank capacity. Learn more.