Public funds are a wonderful source of deposits for many community institutions, providing liquidity while also tying local communities to their local lenders. These funds — sourced from state, local, and municipal government entities and public institutions including school districts, fire and police departments, public hospitals, and others — provide a reliable and substantial source of deposits, enabling credit unions to support community lending and investment initiatives. However, attracting public funds is not without its challenges. Competitive request for proposal (RFP) processes can pose significant hurdles, and the law varies state by state on whether credit unions can hold public funds.
A key part of attracting and retaining public funds is security. Most regulation requires public funds deposited at financial institutions to be insured, and any amount that is not insured must be collateralized. The ModernFi CU team helps credit unions compete for, win, retain, and grow public funds by providing accounts with extended NCUA insurance*. These accounts, which provide millions in NCUA insurance per TIN*, offer a strong value proposition for credit unions during the bidding process, and allow our partners to fully insure funds once received, removing the need for collateral and freeing up liquidity for lending.
As we help more credit unions further their mission of serving their local communities by servicing public funds, we receive more questions around which states allow credit unions to hold these funds. The answer is nuanced, not always straightforward, and varies widely. To be helpful, our team has put together a brief state-by-state overview to serve as a resource and reference for any credit union looking to target public funds for deposit growth.
Please reach out to the ModernFi team any time if you’d like to learn more about growing your public funds, or if you have any comments on the resources shared here.
Best,
The ModernFi CU Team
* NCUA insurance provided by program credit unions
Provided for educational purposes only. Not legal advice.
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