What does everyone want from their bank? Security.

Whether you run a business, a nonprofit or even a town or a city, you want confidence that your bank deposits are safe.

What if you could get that certainty with a simple product that pays a competitive rate and keeps the funds both liquid and local?

It’s not too good to be true. Three thousand banks, including American National Bank, belong to a network created by IntraFi to provide this protection through reciprocal deposit products.

“For any client looking to identify opportunities to provide FDIC insurance throughout their depository portfolio, we have a solution that can provide that,” explained Jason Hansen, ANB’s president. “It’s a highly valuable tool for all business clients, including nonprofits which are responsible for managing and protecting private and public funds to support programmatic needs.”

The network effect

To understand how reciprocal deposits work, consider a simple example: A client deposits $1 million at ANB. The bank keeps $250,000 — the amount covered by FDIC — and sends the balance to three other banks in the IntraFi network. Each of those banks “reciprocates” by sending $250,000 back to ANB. So, the entire $1 million is insured and is available for lending in ANB’s markets.

“We tell our clients that by putting your money with us, you are directly doing more for your neighbors, your employees, your customers and our community,” Hansen said. “The more deposits a community bank possesses, the greater impact we can make through avenues like lending, which supports clients in our community such as small businesses and individuals.”

If reciprocal deposit products sound complicated, they are not — at least not for the customer. IntraFi and the banks take care of all the administrative work: The customer gets one statement from their local bank; the funds are liquid and earn a competitive return.

“The whole system is fairly seamless,” Hansen said. “There is no administrative work for the client.”

Customers weigh in

Phil Ruden is a managing partner at Prodigy LLC, where he manages money for endowments and foundations as well as high-net-worth individuals. Ruden also sits on the board of an Omaha-based nonprofit.

Silicon Valley Bank’s failure last spring “pushed us over the edge,” Ruden said. It was time to find a way to insure his clients’ funds without opening multiple accounts at various banks.

Ruden turned to reciprocal deposits.

“It was a short and quick process,” he said. “It’s not complicated. Everything changed with respect to our cash, except nothing changed. And we can get the money when we need it.”

Reciprocal deposits have worked so well for Prodigy’s clients that Ruden suggested the product to others, including to the chief financial officer of the nonprofit he volunteers with. “Sure, I’ve spread the word,” he said. “Tell me a reason not to be doing this? There isn’t one.”

Morgan Kelly, general counsel and treasurer at Omni Inventive Care, a behavioral health nonprofit in Omaha, agreed.

“Why wouldn’t I take advantage and get that extra layer of security by having the money spread around this network of banks,” Kelly said. “They are not going to charge you and you get all this additional FDIC security.”

Lori Reid, president of Nox-Crete, a global chemical manufacturing company based in Omaha, echoed Ruden’s point about keeping the money available for lending in the local community. “We value the relationship we have with our local bank. They’ve been with us in good times and in bad, so I intend to be a good partner with them.”

While all three ANB clients agreed that security is their main motivation for using reciprocal deposits, Kelly nicely summed up the benefit of keeping the funds local.

“Keeping the money in the community is important because then it can be used to finance local startups, create jobs and help people in our community,” he said. “It’s really incredible to have such win-win-win around one product.”

To find a bank near you that offers these products, search IntraFi's bank locator.

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