Independent Banker - September 2018 - 69

Field Notes
Dispatches from community bankers
A new era for
deposit gathering
D
eposits are the lifeblood of banking.
Deposits fund loans, helping businesses and
communities to thrive. But banks in high-growth
environments-like the Washington, D.C.,
metropolitan area, where MainStreet Bank is
based-often have to look elsewhere to fund their
balance sheets.
The reality is that organic deposit growth
doesn't move in lockstep with loan demand; deposits
often lag. With all the choices available to
customers today, both online and traditional, we
are competing intensely for deposits. Our solution
has been to tap other time-tested sources
of funding, including listing services and other
wholesale deposits. Harnessing technology to
bring in quality deposits from beyond our geographic
footprint has been a part of MainStreet
Bank's funding and growth strategy since we
started the bank in 2004.
Fortunately, one nontraditional source of deposits-reciprocal
deposit networks-got a big
lift from this year's Economic Growth, RegulatoAre
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ry Relief and Consumer Protection Act. The law
permits a well-capitalized bank with a CAMELS
rating of 1 or 2 to hold reciprocal deposits without
treating them as brokered funds, provided
conditions are met. Reciprocal deposits may total
up to the lesser of 20 percent of the bank's total liabilities
or $5 billion without triggering brokered
deposit rules. This change simplifi es our job of
maintaining suffi cient liquidity to meet our daily
and ongoing needs.
We also see positive implications for interest-rate
risk management. Carefully selecting our
deposit sources lets us better control the timing of
deposit maturities. For example, if we have a gap
in interest-rate risk and really need 24-month deposits,
we can bring them in more quickly than
we could if we relied on organic deposit sources.
Bringing in deposits through listing services is
not just a win for us. It also benefi ts the banks
that originate the deposits. Banks in communities
with weaker loan demand are able to accept
deposits locally and deploy them nationally.
Funds, representing customer relationships that
might otherwise leech out of those banks altogether,
are kept within the banking system and
put to productive use.
We are clearly seeing that a digital banking
revolution is upon us, and its benefi ts touch both
deposit gathering and liquidity management.
Banks can now more readily source deposits from
communities that have an abundance of excess liquidity
and put those dollars to work where loan
demand is high.
JEFF DICK
is chairman
and CEO of
MainStreet
Bank in
Fairfax, Va.
With proper reporting and analytics, we thoroughly
understand the nature of our deposits,
recognize volatility through stress testing, and
stay in sync with regulatory expectations. More
than ever, deposit sourcing clearly has the winds
of technology innovation at its back.
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Independent Banker - September 2018

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