Community banking is truly the foundation of many towns and cities across America. These banks are often the first place people go to get a mortgage, start a business, or simply open their first bank account. Healthy community banks mean a healthy local economy – a place where businesses and families can thrive.
However, community banks are facing more challenges than ever before. They must grapple with keeping deposits coming in, keep up with the host of new fintech on the market, compete with larger banks that can offer more products or better rates, and manage the ever-present issue of ongoing regulatory compliance.
It is in the best interest of everyone that community banks not just survive, but thrive. Corporate, nonprofit, and high-net-worth depositors can meet both ESG and financial goals by supporting community banks through a comprehensive deposit management strategy.
To understand how deposit management strategies can support community banks, we must first cover what deposit management is and how it can benefit your overall financial strategy.
Deposit management refers to the strategy employed to streamline and manage deposit accounts, utilizing a variety of deposit products and operational systems. Large depositors often utilize numerous deposit accounts and financial institutions, moving funds to find great rates, deposit safety, and occasionally to satisfy loan requirements.
Deposits can be managed by internal financial staff or outsourced to a deposit management partner like Ampersand. Ensuring that you have a comprehensive deposit management strategy can help you get competitive rates on your deposits and ensure they have access to deposit protection through a qualified financial institution partners.
Deposit management can also be a vehicle to support the community through community banking, as well as key organizations or social issues that are important to your organization.
When deposits are placed with community banks, they contribute to the overall deposit base of that institution, which contributes to its stability and its ability to make loans to local business owners and families. Many community banks are also classified as Community Development Financial Institutions (CDFIs) and/or Minority Depository Institutions (MDIs).
CDFIs are specialized financial entities that provide financial products and services to underserved and economically disadvantaged communities. CDFIs are certified by the U.S. Department of the Treasury's CDFI Fund with the primary goal of promoting economic development, creating jobs, and providing access to affordable financial services in low-income, distressed, and underserved communities. When you deposit with a CDFI, you are directly contributing to the improvement of underserved communities.
MDIs are federally insured depository institutions where a majority ownership (at least 51%) is held by minority individuals. Additionally, MDIs can also be defined as institutions where a significant percentage of the board of directors is composed of minority members, and the community that the institution serves is predominantly minority. Supporting MDIs with deposits ensures that you are helping to bridge the gap in financial services access for minority populations and promoting financial inclusion to underbanked communities.
You don’t have to sacrifice rate or safety to support community banking when developing your deposit management strategy. You can start small by making a deposit with several local community banks and prioritize working with CDFIs and MDIs.
However, the process of vetting partner banks, managing funds, and optimizing for rate and safety can be time-consuming and resource-heavy. That’s why Ampersand works with qualified financial institution partners as part of our AmpersandAlign™ program. We are ready to assist you with a detailed plan to help you meet your financial goals while supporting your community.
Community banks are essential to the health and prosperity of local economies. By adopting effective deposit management strategies, you can support these vital institutions, promote economic development, and meet your financial objectives. Whether you’re a corporation, nonprofit, or high-net-worth individual, consider how your deposits can make a meaningful impact.
Learn how Ampersand can help your organization with deposit management strategies. Contact Ampersand to get started.
