The Reciprocal Deposit Cap Went From 20 Percent to 50. Nobody Printed the Number.

A law that changes how community banks classify a chunk of their deposit base took effect on July 11, 2026, and the number at the center of it did not appear in the announcements.

The 21st Century ROAD to Housing Act became law that Saturday, without a signature, after the ten-day veto period ran out.¹ Buried in Title IX, past the housing provisions, sits Section 902, "Keeping deposits local." It rewrites the reciprocal deposit exception community banks have used since 2018.

IntraFi's own release, when the deal was announced on June 16, said the bill "will allow banks to count substantially more reciprocal deposits as nonbrokered." Substantially more than what, and up to what, went unstated.¹² ICBA's July 13 summary said banks "can now hold custodial deposits and reciprocal deposits without classification as brokered deposits."¹² That is closer to the spirit than the text. There are still caps. They just moved.

They moved to this.

By the numbers

50%

of liabilities, up from 20 percent.

The number nobody printed

The 2018 version was one sentence with two numbers in it. Reciprocal deposits escaped brokered treatment up to "the lesser of" $5,000,000,000 or "an amount equal to 20 percent of the total liabilities of the agent institution."²

Section 902 strikes that paragraph and replaces it with three tiers. The excluded amount is now the sum of 50 percent of the portion of total liabilities at or below $1,000,000,000, 40 percent of the portion above $1,000,000,000 up to $10,000,000,000, and 30 percent of the portion above $10,000,000,000 up to $96,333,333,333.¹

Two things changed, and only one of them matters to a community bank.

The $5 billion dollar cap is gone entirely. That cap never bound anyone in this publication's universe. A bank needed $25 billion in liabilities before 20 percent of them reached $5 billion.

The percentage is what bound community banks, and the percentage went up by half again on the first billion. Working the statutory tiers by hand:

• $500 million in total liabilities. Old exclusion $100 million. New exclusion $250 million.
• $1 billion. Old $200 million. New $500 million.
• $2 billion. Old $400 million. New $900 million.
• $10 billion. Old $2 billion. New $4.1 billion.
• $25 billion. Old $5 billion, where the dollar cap and the percentage test met exactly. New $8.6 billion.

Those figures are our arithmetic on the statutory percentages, not numbers the FDIC or Congress published. For a bank at the top of this publication's range, the exclusion roughly doubled.

What changes on your brokered deposit line

Reciprocal deposits and brokered deposits are separate lines on Schedule RC-E, and the relationship between them is what Section 902 acts on. Reciprocal deposits are reported on their own memorandum line. Brokered deposits are reported on another, and reciprocal deposits that fall outside the Section 29 exception are counted inside the brokered figure. Raising the exception moves dollars off the brokered line without a single deposit moving.

That reclassification reaches assessments through two channels.

The first is the brokered deposit adjustment at 12 CFR 327.16(e)(3). It applies 25 basis points to the ratio of the excess of brokered deposits over 10 percent of domestic deposits, divided by the assessment base. The adjustment is capped at 10 basis points and floored at zero, and it does not begin until brokered deposits exceed 10 percent of domestic deposits.⁶ Below that line, reclassification changes nothing about what you pay.

The second is the small institution financial ratios method at 12 CFR 327.16(a)(1), where the Brokered Deposit Ratio carries a pricing multiplier of 0.264. Banks that are well capitalized with a CAMELS composite of 1 or 2 already deduct brokered reciprocal deposits from that ratio.⁷ So the assessment relief in Section 902 is worth the most to banks that were above the old cap and did not hold a 1 or a 2.

Who just got room, and who did not

Section 902(b) is the quieter half of the provision, and it may matter more.

To use the exception, a bank has to be an "agent institution." The 2018 test required that the bank, when most recently examined, "was found to have a composite condition of outstanding or good" and is well capitalized. Section 902(b) strikes that phrase and inserts "was assigned a CAMELS rating of 1, 2, or 3."¹

A composite 3 bank now qualifies. Under the old text it did not. That is a meaningful widening, and it lands as the FDIC is separately proposing to revise the CAMELS system itself, which means the gate to this exception now keys off a rating whose construction is under review.

Two other prongs survive untouched. A bank can qualify by waiver under Section 29(c). And a bank that falls out of eligibility can still hold reciprocal deposits up to the average of its balances on the last day of each of the four preceding quarters,³ so it can keep what it has but cannot grow.

One more thing for anyone reading the statute closely. Section 902(b) removed the "composite condition of outstanding or good" language from the eligibility clause but left the identical phrase standing in the four-quarter-average prong, which now refers to a standard that no longer appears where it is pointing.³ We read that as a conforming-amendment gap rather than a substantive change. No commentator has addressed it, and no agency has been asked.

Section 901, one section earlier, did something parallel for custodial deposits: a 20 percent of liabilities exclusion, available only to institutions under $10 billion in total assets at a composite 1, 2, or 3.⁴ And Section 903 raised the asset threshold for the extended examination cycle from $3 billion to $6 billion.⁵ Three of the four community bank provisions in a housing law are about deposit classification and exam burden.

The funding cost this lands in

New headroom arrives against a funding backdrop that has not eased much. We pulled FDIC data for every insured institution reporting between $100 million and $2 billion in total assets and computed the aggregate cost of funding earning assets at each first quarter since 2023.¹¹

By the numbers

Cost of funding earning assets, banks $100 million to $2 billion in assets

Cost of funding earning assets, banks $100 million to $2 billion in assets (Percent, annualized)

Period	Percent, annualized
Q1 2023	1.09
Q1 2024	2.04
Q1 2025	1.99
Q1 2026	1.79

Funding costs nearly doubled between the first quarters of 2023 and 2024, and three years later they have given back about a quarter of that increase. The repricing has slowed without reversing.

We looked for a published forecast of CD repricing extending into 2027 and could not locate a primary source for one. A sentence to that effect circulates in trade coverage, attributed variously and without a document behind it. We are not going to print a forecast we cannot cite. The FDIC data supports something narrower. Funding costs at community banks are still roughly 70 basis points above where they were three years ago, and reciprocal deposits carry a rate the agent institution has to set.

Shallow growth counts the same as real growth

Amanda Marshall of ADVANTAGE, powered by JMFA, published a piece in June arguing that primacy is what is actually contested. "Whoever owns the direct deposit owns everything downstream: the daily balance, the debit activity, the data, and the first look at every future borrowing need," she wrote, and her read on the competition is optimistic: "most of those competing accounts are shallow."¹³

Her argument runs outward. Fintech accounts are thin, so the primary relationship is winnable.

The mirror of that argument is ours, and Section 902 makes it easier to ignore. A cap increase grants capacity, not relationships. Nothing in the statute made a deposit stickier, cheaper, or more primary. It changed a classification.

We should state the honest counter to our own framing. Reciprocal deposits are contractual placements through a network at a rate the agent institution sets, usually anchoring a municipal, commercial, or nonprofit relationship the bank already has. That is a different risk profile from rate-shopped retail growth, and treating the two as equivalent would be sloppy. The Dallas Fed put $422 billion in reciprocal networks at the end of the first quarter of 2025, 6.47 percent of deposits at banks under $10 billion in assets.¹⁰ This is established plumbing.

The narrower exposure is worth naming. A bank that uses the new headroom to hold a relationship it already had is doing balance sheet management. A bank that uses it to book balances it could not otherwise fund, at rates it set to win them, has bought capacity and called it growth. Neither the Call Report nor your deposit growth number will tell the two apart.

The honest unknowns

No agency has said anything. As of publication, no FDIC rule, financial institution letter, interpretive guidance, or Call Report instruction revision implements Section 901 or Section 902. Section 902 carries no effective-date clause and no rulemaking precondition, so banks are applying it unassisted.

The FDIC has to study it by January 11, 2027. Section 902(c) directs the FDIC, in consultation with the Federal Reserve, to study how reciprocal deposits have performed since 2018, broken out by institution size, including usage during periods of stress, and to report to House Financial Services and Senate Banking within six months of enactment.¹ That report is the first real look at whether this exception behaves the way Congress assumed.

The $96,333,333,333 figure has no published explanation. The three tiers sum to a ceiling of exactly $30 billion at that level of liabilities, which is almost certainly why the odd number is there. That is our arithmetic. No committee report or agency document we found explains it.

The 2024 brokered deposit rulemaking is gone, not resolved. The FDIC's August 2024 proposal, which would have narrowed the deposit broker definition and addressed how an institution regains agent institution status, was withdrawn on March 3, 2025.⁸ The FDIC said it would issue a new proposal if it acts again. It has not. Separately, the assessments proposal published June 30, 2026 leaves the brokered deposit adjustment unchanged and does not mention reciprocal deposits at all; comments close August 31, 2026.⁹

We could not source an industry reaction with a number in it. Not from IntraFi, not from ICBA, not from ABA. The trade statements celebrate the provision without quantifying it.

What to do before the FDIC study lands

1. Recompute your own exclusion under the tiers, off total liabilities rather than total assets. The statute says liabilities. Using assets will overstate your room.
2. Find out whether the old cap was actually binding on you. For most banks under $2 billion it was not, and in that case Section 902 changed your options, not your current reporting.
3. Check your brokered deposits against 10 percent of domestic deposits. Below that line, the assessment adjustment at 12 CFR 327.16(e)(3) is zero and reclassification carries no pricing benefit.
4. Decide, before you use the headroom, whether a given balance is a relationship you are defending or a balance you are buying. Write the answer down at the time, not at the next ALCO meeting.

Methodology

Statutory text was read in the enrolled public law at govinfo: Pub. L. 119-101 at 140 Stat. 965-967 for Sections 901 through 903, and Pub. L. 115-174 at 132 Stat. 1307-1308 for the 2018 language it replaces. Assessment rules were read in the current eCFR at 12 CFR 327.8 and 327.16, retrieved July 31, 2026. Deposit and funding figures come from a July 31, 2026 pull of the FDIC BankFind financials API covering every insured institution reporting total assets between $100 million and $2 billion at each report date, with the cost of funding earning assets computed as aggregate total interest expense, annualized from the first-quarter year-to-date figure, over aggregate total earning assets. The per-bank cap comparisons and the $30 billion implied ceiling are our arithmetic on the statutory percentages and are labeled as such in the text. Call Report line references describe the reporting relationship between the reciprocal and brokered memorandum items rather than citing item numbers, which we could not confirm against the current-quarter instruction book before publication. The Deposit Report has no relationship with IntraFi, JMFA, ADVANTAGE, ICBA, or any vendor or association named here.