Community banks, which make up at least 90% of all banks nationwide, are the backbone of American small businesses.1 An ICBA report found that roughly 60% of small business loans and over 80% of agricultural loans come from community banks.2 But community banks face steep challenges, including net interest margin compression, compliance and cybersecurity burdens, and new, often digital-only, competitors. In fact, 94% of respondents to IntraFi’s Q4 2025 survey of bank executives say they expect deposit competition to remain at current levels or increase over the next year. To stay competitive and continue providing the vital banking services their communities depend on, community banks need every advantage available to attract and retain high-value relationships. Reciprocal deposits are an essential tool that allows community banks to support local deposit and lending needs, enabling banks to offer large depositors access to millions in FDIC insurance while keeping funds local to lend in the community. Reciprocal Deposits Typically Have a High Reinvestment Rate Reciprocal deposits are deposits that a bank receives through a deposit placement network in return for placing a matching amount of deposits at other network banks. Importantly, the institution placing the deposit maintains its relationship with the depositor, allowing safety-conscious customers to obtain FDIC insurance on large balances through multiple network banks while maintaining a single bank relationship. At the same time, a bank that participates in a deposit placement network can attract and retain more deposits from local customers. Historically, reciprocal deposits have DRIVING COMMUNITY PROSPERITY WITH RECIPROCAL DEPOSITS By Joe Hooker, Chief Sales Officer, IntraFi been “sticky,” with high reinvestment rates and low likelihood of liquidation in any given month, even as total accounts and balances steadily increase. After the high-profile bank failures of 2023, reciprocal deposit balances at banks with between $1 billion and $100 billion in assets increased by 20% and remained elevated across 2024. A recent research paper finds that higher levels of insured deposits were associated with reduced deposit outflows during the 2023 regional banking crisis. The study also reports that banks with higher insured deposit levels paid lower deposit interest rates, grew larger and increased their local deposit market share over time.3 In fact, the growth rate for reciprocal deposit balances across banks of all sizes was 131% from 2022 to 2023. Reciprocal balances grew an additional 15% across 2024.4 Reciprocal Deposits Compare Well to Other Bank Funding Choices In addition to helping banks grow wallet share among local customers, reciprocal deposits can offer several advantages over other bank funding options. • Reduced Collateralization Needs: Reciprocal deposits can reduce or eliminate collateralization requirements, freeing up pledged collateral and reducing the burdens associated with tracking collateral. • Alternative to Wholesale Funding: Unlike many forms of wholesale funding, most 16
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