Pub. 16 2019 Issue 1

Issue 1 • 2019 11 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S - H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S The Advisors’ Trust Company ® Zia Trust, Inc. 505.881.3338 www.ziatrust.com 6301 Indian School Rd. NE Suite 800, Albuquerque, NM 87110 • We work alongside your customers’ investment advisor • As a New Mexico banker, you retain your important customers while Zia Trust serves as trustee of their trust • Zia Trust is a trustee only - we offer no depository services or investment services Do your customers need trust services? The Economic Growth, Regulatory Relief, and Consumer Protection Act This new law recognizes something that many in the bank- ing sector have long understood – reciprocal deposits behave as core deposits in that they are “sticky” (CDARS deposits reinvest at a rate of approximately 80%, for example), and that the institution accepting the deposit maintains the relation- ship with the depositor. 2 Specifically, the law amends section 29 of the Federal De - posit Insurance Act so that, subject to the definitions, terms, and conditions of the Act as amended: • If a bank is well capitalized and has a composite condi- tion of outstanding or good (CAMELS 1 or 2), its recip - rocal deposits up to the lesser of $5 billion or 20% of the bank’s total liabilities are no longer considered brokered. Reciprocal deposits over these amounts are allowed, but the incremental amount (overage) is treated as brokered. • If a bank drops below well capitalized, the bank no lon- ger requires a waiver from the FDIC to continue accept - ing reciprocal deposits, so long as the bank does not receive an amount of reciprocal deposits that causes its total reciprocal deposits to exceed a specified previous average. As before, interest rate restrictions apply while the bank is less than well capitalized. Banks now have a much larger, approved source of stable de- posits that can be tapped. This means banks can help even more customers—including businesses (large and small), nonprofits, municipal governments, financial advisers, and even individu - als—to safeguard their funds, potentially at even higher levels. All at the same time attracting locally priced, large-dollar depos- its, which can be used to reinvest in the bank’s community. Furthermore, banks can use reciprocal deposits to replace more expensive deposits, like routinely collateralized deposits that come with tracking burdens, and those from listing ser- vices (generally associated with wholesale pricing and no loyal or local customer relationship). Making the Most of This New Opportunity Now is the time to act by taking advantage of this import- ant change in banking law. Read more about the new law and about the nation’s largest, most well-known reciprocal deposit services by visiting promnetwork.com . For more information, contact Chuck McBrayer at cmcbrayer@promnetwork.com . n 1 The BankExecutive Business Outlook Survey is a publication of Promontory Interfinancial Network, LLC. 2 Promontory Interfinancial Network calculates the reinvestment rate as the percentage of the aggregate balance of CDARS deposits that are reinvested through CDARS within 28 days of maturity.