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

Sunday Reading - Changing the Map

  Changing the Map     Redistricting, explained Congressional redistricting is the process by which states redraw electoral district boundaries   that determine representation in the US House of Representatives. The Constitution, federal law, and court rulings require districts to have roughly equal populations, avoid discrimination against racial or language minorities, and, in most states, be geographically contiguous. For most of American history, redistricting has followed a predictable cycle, occurring every 10 years after the census.   Gerrymandering is the deliberate manipulation of district boundaries to advantage one political party. Common tactics  by both major American political parties include packing opposition voters i...
Post a Comment
Read Complete Article HERE>»

Reuters: Trump Regulators Launch Biggest Bank Oversight Overhaul Since 2008

Is NCUA next? WASHINGTON—Federal banking regulators under President Trump are undertaking what Reuters described as the most significant overhaul of bank supervision since the 2008 financial crisis, shifting examiner focus away from process and compliance issues and toward what agencies consider “material” financial risks. According to Reuters, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have directed examiners to concentrate on risks that pose direct threats to a bank’s safety and soundness, rather than on paperwork deficiencies, governance concerns or procedural issues that do not immediately affect financial stability. Reuters reported that regulators have also moved away from evaluating banks based on “reputational risk,” a supervisory concept long criticized by banks as overly subjective. The change follows complaints from President Trump and others that financial institutions have used reputational-risk considerations...
Post a Comment
Read Complete Article HERE>»

Hauptman Tells Congress CU Health is Strong; Responds to Questions from Committee

WASHINGTON — National Credit Union Administration Chairman Kyle Hauptman told members of the House Financial Services Committee on Thursday that the nation’s credit union system remains financially strong, while warning that rising delinquencies and consumer financial stress continue to warrant close monitoring. Hauptman also responded to a handful of questions from members of Congress, as well. Hauptman appeared as part of the regular hearings on Oversight of Prudential Regulators. Also appearing as witnesses were Michelle Bowman, vice chair for supervision with the Federal Reserve; Travis Hill, FDIC chairman, and Jonathan Gould, the acting Comptroller of the Currency. Kyle Hauptman In his prepared statement, Hauptman said federally insured credit unions remain well-capitalized and continue to meet members’ borrowing needs despite economic headwinds. He said the NCUA is focused on maintaining safety and soundness, protecting the National Credit Union Share Insurance Fund and creating...
Post a Comment
Read Complete Article HERE>»

The Rebounding Relevance of Adjustable-Rate Mortgages = By Kevin Hearden & Steve Rick

  This traditional mortgage lending product could help CUs attract high-contributing members and boost much-needed interest income. By Kevin Hearden & Steve Rick | August 19, 2022 at 03:33 PM Today, nearly three-quarters (72%) of credit unions’ total revenues come from interest income. So, when interest earnings as a percent of assets dropped almost 30% in April of this year, more than one alarm bell sounded within the movement. Credit union leaders across the country are rightly concerned about the sustainability of mortgage lending within what is already a highly competitive environment. In fact, lending executives participating in a May 2022 MGIC survey ranked the expected difficulty of 2022 at an eight out of 10. And while shiny startup strategies for boosting interest income make the headlines, it may be the resurgence of a traditional mortgage lending product that makes the difference. Borrowers Give ARMs a Fresh Look We’re talking, of c...
Post a Comment
Read Complete Article HERE>»

The Role of the Board Chair

Tim Harrington, CPA   CEO, TEAM Resources The Role of the Board Chair Recently I had the chance to spend some time with a great group of board members . One of the things we talked about was the role of the board chair. I thought this well worth putting down on *paper* as it were. The role of the chairperson is multi-faceted, complex, and often changing within the context of the organization’s dynamic. Unfortunately, there’s no perfect set of “rules.” But there are some guidelines. Here are our “tips” on navigating the position successfully: Roles Facilitator  – The board chair must draw together the individual directors into a team, working together on behalf of the membership and the credit union. To do that, s/he must wrangle individual personalities, draw out conversation from some, and rein it in from others. Having a solid understanding of the personalities of each director … and the CEO helps the chair keep things on track, moving forward, and civil. ...
Post a Comment
Read Complete Article HERE>»

Trump Accounts Program For Children Moves Forward With New Mobile App Launch

  WASHINGTON—The Treasury Department on Thursday announced the launch of the new Trump Accounts mobile app, marking the next phase of the Administration’s rollout of its new federally backed investment savings program for children ahead of the program’s official July 4 launch date. Donald Trump The app, now available through major mobile app stores, will serve as the primary platform for families to manage and activate Trump Accounts. Treasury Secretary Scott Bessent said the app is intended to give parents and guardians a “simple, secure way” to participate in the program, which was created under the 2025 Republican tax-and-spending package. Families that already submitted IRS Form 4547 to enroll children in the program will begin receiving phased activation emails between now and July 4, according to Treasury. Under the program, eligible children born between Jan. 1, 2025, and Dec. 31, 2028, can receive a one-time $1,000 federal seed contribution into a tax-deferred investment ac...
Post a Comment
Read Complete Article HERE>»

Cheer Up and Change: "Wait and see is not a plan."

I posted this a year ago and thought I would bring it back to see if any of his predictions came true. Take a look and tell us what you think. Grant Sheehan CEO Cheer Up and Change: The Demographic Mandate At a conference I recently attended Monday morning started off with a great session by demographer and futurist Ken Gronbach, who laid out his predictions on where we’re going and what we can expect as demographics change. I was pleasantly surprised that the future isn’t sounding as bleak as the news might have you believe. Gronbach offered lots of predictions for where our society and our world is headed. His predictions were given with a purpose: To help associations build their vision and plan for the future. As Gronbach stressed,  "Wait and see is not a plan." I’ve decided to arrange this recap into a list of my takeaways rather than a narrative recap. I hope you get as much out of this information as I did! Things to Expect: Big Changes in Retail : Gronbach ...
Post a Comment
Read Complete Article HERE>»

2 Historical Moments: CUNA Mutual Officially Changes Name Today, As Union Also Calls Strike

MADISON, Wis.–One of the most iconic names in credit unions and credit union history in the U.S. will officially change today when CUNA Mutual Group begins operating under the TruStage brand across the enterprise. All enterprise, business-to-business and consumer brands are now unified under the single brand name of TruStage, which the company has been using for some of its products for a number of years. The new brand is being introduced at the same time approximately 450 employees represented by Office & Professional Employees Local 39 have gone on strike. It is the first strike in the company and the union's history. As CUToday.info has been reporting, the company and the union have been at an impasse since February of 2022, when t...
Post a Comment
Read Complete Article HERE>»

Supplemental Capital to be Considered by NCUA

Supplemental Capital At the NCUA’s October board meeting, senior staff of the NCUA submitted a briefing report (the “Report”) to the NCUA Board (the “Board”) on the issues concerning the use of supplemental capital by federally insured credit unions (“FICUs”).  The use of supplemental capital presents a number of regulatory and policy issues that would need to be addressed prior to authorizing this form of capital for all FICUs.  The Board considered issuing an advanced notice of proposed rulemaking (“ANPR”) in the near future which would give credit unions and the public the opportunity to provide comment before the proposed rule stage.  Supplemental capital does not provide any capital support under the NCUA’s net worth requirements because it does not count as equity under generally accepted accounting principles, but it would allow FICUs to have a greater concentration of member business loans and long term mortgage loans since it could be used by FICUs to meet...
Post a Comment
Read Complete Article HERE>»

Ransomware: 'It's A Growing Issue'

MADISON, Wis.—Ransomware attacks, already a quiet concern that has been growing among credit unions, are expected to dramatically increase this year—with one analyst saying there is “no silver bullet” to prevent the threat. Ransomware is a type of malicious software designed to block access to a computer system or PC until a sum of money is paid. In the case of a financial institution, crooks first use the malware to encrypt the contents of the FI’s data and then extract a ransom in exchange for decrypting the information and allowing the victim to regain access. It’s an issue, according to one regulator source who asked for anonymity that has been growing within credit unions, many of which have paid ransoms to regain access to their data and have chosen not to speaking publicly about the crime. “This has become a huge problem,” said Ken Otsuka, senior consultant in CUNA Mutual Group’s risk management department, adding that CUNA Mutual Group’s cyber liability coverage data d...
Post a Comment
Read Complete Article HERE>»