Bank of First Deposit (BOFD)

The bank of first deposit (BOFD) is a bank where someone first deposits a check to an account. If someone subsequently draws the check on the same bank, it is an "on-us" item. If the check is drawn on another institution, the bank considers it a transit item.

As noted above, a depositor may draw the same check at the same institution; this is called an “on-us” item. An on-us item may be in check or draft form. The depositor can cash this immediately or deposit it into another account for safekeeping. The drawing account must have a sufficient balance to pay the check. On-us items can also be in the form of electronic debits or transfers. On-us items can benefit banks as they often obtain revenue from both the acquiring and issuing sides.

In contrast, transit items are checks or drafts, which an institution that is separate from its original place of deposit issues. During processing, a bank separates transit items from checks that its own customers write. Transit items are submitted to the drawee bank through either direct presentation or via a local clearing house.

The U.S. Federal Reserve System originated during the financial panic of 1907 at a time when many banks were failing to clear checks drawn on other banks. During this time in U.S. history, there was a lack of dependable credit, which stunted growth in many sectors, particularly agriculture and industry. Many began to fear that the U.S. banking and trust industries were experiencing liquidity issues and thus starting to perform bank runs.

The development of the U.S. Federal Reserve from this panic solidified the position of the bank of first deposit in commercial banking.

In the 1940s Industry routing numbers (which appear at the bottom of checks) helped banks of first deposit facilitate a growing volume of transactions. A routing transit number is the nine-digit numerical code, which identifies a banking or other U.S. financial institution to clearing funds or processing checks. The first four digits of any routing code will designate the Federal Reserve Bank of the district where the bank is located. The next four digits denote the specific financial institution, while the last digit is a classifier for the check or negotiable instrument.