Skip to main content

Your Credit Union CAN Use Public Fund Deposits To Fund Assets

By Corporate One Federal Credit Union


Once largely thought of as taboo, the use of external funding is now widely accepted throughout the credit union industry. In fact, the NCUA has required all credit unions to seek multiple liquidity sources and document those sources in their liquidity policy.
As the acceptance of external funding has improved, credit unions are increasingly sourcing funds from many channels, including the Federal Home Loan Bank System, the corporate credit union network, and several non-member deposit channels, such as public fund deposits.
Yes, public fund deposits are being increasingly sourced to fund credit union assets.

Increasing Growth, Benefits, And Uses

Total member and non-member government deposits totaled $5.4 billion at year-end 2017. This is an increase of 27% since 2015. While this amount pales in comparison to total deposits and other liabilities, how important are these deposits to the nearly 500 credit unions who report them?
Many of these credit unions are strategically pursuing public fund deposits as these deposits are an additive funding source from outside the industry. These deposits provide stability as they are not subject to the liquidity strain that can occur across the entire credit union and banking industry. Additionally, they mitigate the seasonality of consumer deposits and support core deposit metrics.
When pursuing a matched book asset liability strategy, public fund deposits offer a compelling and economically sound funding source for select loan portfolios while preserving your existing credit lines. The amount and term of a public fund deposit can be structured to closely match a member business loan origination. Or, the deposits can be used to fund an unsecured loan portfolio or a specific vintage of originated of auto loans.

Acquiring Public Fund Deposits

But, you ask, how are credit unions accepting public fund deposits? Public fund deposits are largely controlled by state statutes for both the depositors and deposit takers. When these statutes were initially created, the credit union industry was largely cut out, and public unit depositors were limited to FDIC-insured institutions. Much like the taboo of using external funding, many credit unions think they are completely locked out of the public funds market. But that is not true.
The great news is that efforts to facilitate public fund deposits to credit unions are paying off. Many states now allow government entities to deposit funds in credit unions. Additionally, there are states that allow their government entities to place their deposits nationwide.
So, consider a federally insured and chartered credit union in Florida or Ohio accepting public fund deposits from multiple government entities from Minnesota. This is happening.

Looking At Collateralized Options

While credit unions may find the NCUSIF insurance limitation restrictive for raising external deposits, several states allow collateralized deposit options. Using excess collateral at a Federal Home Loan Bank or the Federal Reserve Bank are a couple of options for collateralizing deposits. Or, credit unions could work directly with their safekeeping agent on possible collateral arrangements. Lastly, these states may also allow a public fund deposit to be supported by a letter of credit issued from a Federal Home Loan Bank.

Serving Our Local Communities

Credit unions restricted on a local level continue to lobby legislators to modify rules and statutes to expand the deposit market to credit unions. This is a growing need, as smaller communities with local and state government operations have lost bank presence in their community and thus access to local financial services. The desire and willingness of public fund depositors, and their aggregators, to place deposits with credit unions will certainly promote further change.
Overall, continued growth of public fund deposits in credit unions will further support our position as a viable and, in some cases, preferable deposit taker for local government entities.

Getting Started

Learn how your credit union can take advantage of public fund deposits in this on-demand webinar: Public Fund Deposits And Your Credit Union.
Perry Jones is VP, Portfolio Manager, at Corporate One FCU


Read more: Yes, Your Credit Union CAN Use Public Fund Deposits To Fund Assets | Credit Unionshttp://www.creditunions.com/articles/yes-your-credit-union-can-use-public-fund-deposits-to-fund-assets/#ixzz5FZPo5dH4

Comments

Post a Comment

Please no profanity or political comments.

Popular posts from this blog

Syracuse Fire Department Credit Union

Remember, you're not alone with  NCOFCU.org Join/Upgrade Check out some of NCOFCU's additional features: First Responder Credit Union Academy Financial Literacy Podcasts YouTube Mini's Blog Job Board
Post a Comment
Read Complete Article HERE>»

Happy Holidays To All Who Serve

  Happy Holidays To All Who Serve 12/22/2025 10:28 am   By Grant Sheehan and Anthony Hernandez Every year, many Americans celebrate the joy of family and relief from work the holidays bring. Apart from the hustle and bustle, the holiday season is a special time to be with loved ones, engaging in family traditions and rituals, and making memories that will last a lifetime. However, not everyone gets to partake in the holiday gatherings.   There are over a hundred thousand military members serving in harm’s way or in 24-hour command center...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - The gold standard, explained

  Gold Standard       The gold standard, explained A gold standard is a system where a country’s currency is pegged to, and can be converted into, a fixed amount of gold. It’s typically meant to create a sense of security in the country’s currency: When a government uses a gold standard , its currency can be exchanged for an equivalent amount of gold—although regulations around redemption vary by country.   After the Civil War, in 1873, America adopted the gold standard for the first time. At the time, if gold was priced at $100 an ounce, each dollar  rep...
Post a Comment
Read Complete Article HERE>»

Is another housing bubble brewing?

While there have been fears expressed by some of a repeat of the housing bubble that led to the housing crisis just over a decade ago, numerous real estate analysts say they believe the market fundamentals are much stronger now and that the sharp increase in home prices reflects low rates, a lack of inventory, and demographics. To be sure, the market is hot in many markets, with home sellers receiving multiple cash offers, often over the listed price, on homes. Some analysts, including those at Swiss banking giant UBS, have published charts showing how home prices are outstripping both wages and rents, reported USA Today. Home prices have appreciated more than 60% since November 2012, incomes have only appreciated by 20% and rents by 30% over the same time period, the report added. “But unlike the real estate boom that led to the Great Recession, this nationwide price spike is not being fueled by a wholesale collapse in lender ethics,” USA Today reported “There aren't any low-doc o...
Post a Comment
Read Complete Article HERE>»

NAFCU Economist: U.S. Might Dodge Recession

Curt Long said a strong jobs report shows resilience despite the Fed’s escalation in interest rates. By Jim DuPlessis | January 06, 2023 CUTimes Source: Shutterstock. NAFCU Chief Economist Curt Long said Friday the continued strength in the job market has increased the odds the nation will dodge a recession this year. The U.S. Bureau of Labor Statistics reported Friday there were 153.7 million seasonally adjusted jobs in December, an increase of 223,000, or 0.1%, from November and up 3% from a year earlier. The unemployment rate was 3.5% in December, down from 3.6% in November and 3.9% in December 2021. Long said December’s rate was the lowest in more than 50 years, while the labor force participation rate rose slightly. Seasonally adjusted average hourly earnings were $32.82 in December, up 0.3% from November and up 4.6% from a year ago, a slightly lower rate of increase from previous months. Curt Long “This is an unambiguously positiv...
Post a Comment
Read Complete Article HERE>»

Many CUs Likely to Face New Operating Challenges "Michael Moebs"

04/08/2024 09:04 pm By Ray Birch LAKE FOREST, Ill.—The trend lines don’t lie: Financial institutions charging high overdraft fees will likely face operating challenges in the near future and may even be forced to merge if they don’t follow the market trend of lowering their OD charge. Michael Moebs, economist and chairman of Moebs $ervices, is offering that forecast following his company’s new overdraft study, which has found overall net OD revenue for 2023 was down 5.7%, with banks dipping by 8.1% to $31.4 billion, thrifts falling by 28.6%. and credit unions actually increasing net revenue 2.2%. The study further reveals the m...
Post a Comment
Read Complete Article HERE>»

“The July jobs report was almost uniformly positive with strong job gains resulting in a large drop in the unemployment rate,” said NAFCU Chief Economist and Vice President of Research Curt Long.

WASHINGTON–The U.S. economy roared into midsummer with strong gains in hiring, according to the latest jobs report, even as questions remain over the ability to maintain the momentum as the Delta variant of the coronavirus continues to spread. According to numbers released last week by the Labor Department, employers added 943,000 jobs in July. But the number comes with a caveat in that the data was collected in the first half of the month, before variant-related cases exploded in many parts of the United States. “The July jobs report was almost uniformly positive with strong job gains resulting in a large drop in the unemployment rate,” said NAFCU Chief Economist and Vice President of Research Curt Long. “The retail sector did not enjoy a share in the gains, losing over 5,000 jobs during the month, but otherwise gains were broad. This report will add to mounting pressure on the Fed to taper asset purchases.” The numbers marked the best monthly performance since August 2020, and under...
Post a Comment
Read Complete Article HERE>»

Web3 Terms Every Professional Should Know

 Jose Triana SideCar For most people, Web3 is an often confused and hard-to-imagine future version of our world complete with its own financial systems and virtual realities we’ll use to interact. And while many of these new technologies sound exciting, a polished and functional version of them is still a ways away.  However, many of the tools and systems that will be used in the future are already being experimented with and are quickly making their way into the association and non-profit industry.  This is why having a basic knowledge of Web3 terms and concepts is key to not only understanding the possibilities for your organization, but also the future implications you need to prepare for as an association leader.  Understanding Web3 At its most basic, however, Web3 is a future iteration of the internet that will be secured by blockchain technology, likely immersive and decentralized, and using alternative finances to keep things moving.  ...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - Lake Manly Returns

  Lake Manly Returns   An ancient lake has  reemerged in California's Death Valley National Park following record rainfall this year.  Between 128,000 and 186,000 years ago, meltwater from ice covering the Sierra Nevada fed rivers that emptied into Badwater Basin, North America’s lowest point at 282 feet below sea level. The steady flow sustained Lake Manly, nearly 100 miles long and roughly 600 feet deep. The lake disappeared as Death Valley evolved into the driest place in North America , with some areas receiving under two inches of rain annually. This year, however, the park received 2.41 inches between September and November, marking its wettest autumn on record and triggering the temporary return of a shorter, shallower Lake Manly.  Above-average rainfall periodically brings Lake Manly back, including in 2023 when Hurricane Hilary dumped 2.2 inches of rain on a single August day, allowing visi...
Post a Comment
Read Complete Article HERE>»

What Is Web 3.0? (And Why Should Banks & Credit Unions Care?)

  A new version of the web-based on blockchain technology — is being predicted and promoted. Even though the trend has vocal naysayers, elements of Web 3.0 are already in use, including by a new crop of disruptive nonbank competitors. By Steve Cocheo , Executive Editor at The Financial Brand If the term “Web 3.0” has crossed your radar, and you are wondering what it is and whether it’s worth starting another ulcer over, we have four words for you: Eco, Valora, Compound and TrueFi. Eco, which promotes the fact that it is not a bank and not FDIC insured, offers accounts held in stablecoins that function as both spending and savings accounts, but with higher returns. Valora is an app available through the App Store and Google Play that uses the blockchain to deliver a version of P2P services out of a mobile crypto wallet. Compound describes itself as “an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.” Among the...
Post a Comment
Read Complete Article HERE>»