Corey Chambas:
As a bank that focuses on business, we work with business leaders all day, every day. We have a front row seat to what's working and what has potential. The First Business Bank podcast is dedicated to sharing insights to help you work better, smarter, and faster to achieve your goals. Let's get into the show. Welcome to the First Business Bank podcast. I'm Cory Chabas, C E O of First Business Financial Services, the parent of First Business Bank. In today's podcast, we're gonna discuss how you can ensure bank deposits of over $250,000 in a streamlined, efficient process. To help me explore this topic further, I've invited Melissa Fellows, senior Vice President and managing Director of Treasury Management Services. To join me, Melissa has more than 20 years experience of helping business leaders improve cashflow, mitigate fraud, and maximize earnings. Melissa, would you please introduce yourself to our audience?
Melissa Fellows:
Hi Corey. Thank you. Yes. Melissa Fellows. I am the managing director of treasury management for First Business Bank, and I oversee the sales organization as well as making sure that we're aligning the right treasury solutions like some of the FDIC insurance topics that we'll cover today.
Corey Chambas:
Our episode today discusses the way individuals, businesses, organizations, and municipalities can receive full FDIC insurance coverage for over $250,000 in deposits. Although we discussed this proactively with our clients on a regular basis, this has become hot topic as of late in 2023. Melissa, I think there's sometimes confusion on exactly what is covered with FDIC insurance. Could you run through that? Please
Melissa Fellows:
Think about your account at a bank. So your traditional checking account, money market account savings account, and bank certificates of deposit. What's not included is a money market, mutual fund stocks, cryptocurrency accounts. So anything that would be outside of the banking system would not be covered by the standard FDIC insurance limits. So again, going back to your traditional bank products,
Corey Chambas:
How much do we get and who gets it first? Tell us about on the individual side.
Melissa Fellows:
Yeah, so individual $250,000 of FDIC insurance coverage. So think about your checking account, Corey, you received $250,000 of FDIC insurance coverage, and that's with each bank, different bank entity that you have in an account with. And if you have a joint account at a bank, it's $250,000 per owner on the account. So your joint checking, for example, would have $500,000 of insurance coverage. So again, it's dependent on the bank, $250,000 per individual, unless if it's a joint account, then it's an additional 250,000. And again, that's with each bank that offers or is a participant in the FDIC.
Corey Chambas:
How does it work on the business side?
Melissa Fellows:
On the business side, it really, the way I like to look at it is looking at by company tax id, so a C-corp, an S-corp, a not-for-profit organization, they receive $250,000 of insurance coverage. It's regardless of the number of accounts that they have with an organization, that's a common question that I'll get from clients. Even though I have three accounts, don't I get $250,000 of coverage for each of those accounts? And the short answer is no. It's really going back to the ownership and to the tax ID for that entity. We do have a number of relationships or companies that we work with. A good example, or common example of this would be an operating entity is set up as an S-corp, but maybe the real estate is set up in an LLC. And so in that case, even though it might be two checking accounts, one's an LLC, one's an S-corp, each of those entities receive $250,000 of FDIC insurance coverage. And so total, yeah, in that online profile, again, it's going back to the id, so $500,000 of coverage between those two entities.
Corey Chambas:
So a lot of people and businesses have more than $250,000, in the bank. What solution do you recommend? What I've heard from a lot of folks is that they need to spread their money around among multiple banks. Is that true?
Melissa Fellows:
Short answer is no, not true. There's definitely more efficient ways to capture or even get up to a hundred percent FDIC insurance coverage without having to open an account at every bank in your area. And so a couple of solutions. The first solution with daily liquidity would be an overnight sweep that would be available for both individuals and for business entities. It could be a not-for-profit. We have municipalities that use an overnight sweep or businesses, but we set a $250,000 target balance in the checking account. And then at the end of the day, everything sweeps to an extended coverage sweep. So it gives you the ability to have the liquidity that you need in an account but it gives you the coverage or the insurance of a hundred percent FDIC insurance coverage in that account. And so we participate or partner within a network that has other participating banks in the network. And so behind the scenes dollars are getting placed in $250,000 increments to other participating banks. But for you, whether again, individual or business, you see it as one bank account linked to your checking account and one statement with, you know, the assurance of a hundred percent FDIC insurance coverage.
Corey Chambas:
What if somebody doesn't need a full liquidity on their money? They have more than they need for daily access and they're looking to earn more, more interest on their account? Are there options there? Yeah,
Melissa Fellows:
Absolutely. So similar to Bank CDs, we partner with another network, um, and we offer CD maturities anywhere from three months to three years that offer a hundred percent FDIC insurance coverage. And so really a great solution to either partner with your overnights extended coverage sweep or maybe it's something that you're looking to stand alone and, and just pick up some additional yield. But it's a bank cd. And because we're a part of this network, again, behind the scenes, the $250,000 increment chunks are getting placed to the other participating banks and the CD network. But again, individual business not-for-profit, municipality, whatever your entity or organization is, everyone's eligible to participate. But again, you see it as one cd, one statement, one rate of return. So definitely couple of options that exist depending on your cash need, whether you need daily access to cash or you know, in today's interest rate environment. If you're looking to place funds for, you know, 3, 6, 9, 12 months even beyond, definitely worthwhile talking to your banker about ways to pick up some additional insurance coverage, but also some additional yield right now.
Corey Chambas:
Are there any other benefits to the extra deposit insurance? Melissa?
Melissa Fellows:
The biggest benefit is really I think knowing that there are a couple of options that exist and you don't have to have multiple bank relationships thinking about it. It's multiple bank accounts to reconcile. If you have a signer account change or update, that's multiple bank accounts that you have to, to update. And so I think just by knowing that there are financial institutions that offer multiple solutions that make it efficient and simple to not only maximize your FDIC insurance coverage, but you can also earn a competitive yield along with that as well. And so really biggest benefit is just knowing that multiple options exist and aligning them with your cash needs.
Corey Chambas:
Melissa, any other final thoughts on extended deposit insurance?
Melissa Fellows:
Yeah, I would just say you don't talk to your banker regularly, whether it's through an annual treasury review or, just a, a proactive reach out to make sure that the structure that you have in place today makes sense. What's a priority today might not be a priority 6, 9, 12 months from now. And so to continue to evaluate and, and have an open dialogue with your banker and bank relationship team and to know that options like this exist.
Corey Chambas:
Great. Yeah, that's always great advice. I wanna thank Melissa Fellows today for discussing this important topic and educating us on deposit insurance. I also want to thank our audience members for listening today. Please be sure to visit First business.bank to check out our resources that we offer to business owners and investors. We invite you to experience the advantage with First Business Bank. If there's any way we can help, please reach out to us. If you want more content like what you just heard delivered straight to your inbox, go to first business bank podcast.com. And if you haven't already, make sure to subscribe to the First Business Bank podcast wherever you listen to podcasts. If you're listening on Apple Podcasts, please leave a quick rating of the show. Thanks so much for listening. First Business Bank member, FDIC.