Public deposits are an increasingly attractive way for credit unions to beef
up share growth and help fund loans in today’s changing financial environment.
Although not accessible to credit unions everywhere, more than a third of
states already allow credit unions to accept such deposits. A number of other
states currently are seeking to pass legislation that would allow credit unions
to use such public funds.
These deposits include funds from state, county or municipal governments, and
school and community college districts that are placed on deposit in an approved
financial institution. For approved credit unions, public deposits can be credited
into regular share, share draft, money market share and share certificates
The challenge of the growing loan demand and slowing share growth scenario
of the past three years has made public deposits particularly appealing.
State Employees Credit Union of Michigan is active in the bidding for public
deposit from the state. “The state divisions conduct a bidding process
by checking with a few approved institutions,” said Chief Financial Officer
His challenge with bidding on deposits is to remain competitive. “On
occasion we might add a couple of basis points to our published share certificate
rate, but we have not needed to add to our published rates for at least a year
or two,” said McVeigh.
Each state that allows credit unions to participate in public deposits has
different laws that pertain to limitations and collateralization. For example,
Minnesota lawmakers recently passed legislation that allows credit unions to
use time deposits at a corporate credit union for collateral.
Learn how your credit union can get involved and secure these funds as an additional
source of deposits at our upcoming webinar: Public
Another Means to Grow Your Credit Union's Share Growth.