October 4, 2012
Five Oregon credit unions have submitted the required notice and paperwork with the Oregon State Treasury to allow them to accept public fund deposits above the National Credit Union Administration’s (NCUA’s) $250,000 limit.
Only qualified banks can currently accept substantial public deposits in Oregon beyond the Federal Deposit Insurance Corporation (FDIC) insured limit of $250,000 per depositor. However, under the Oregon Credit Union Public Funds Collateralization Program, which is expected to take effect on April 1, 2013, credit unions will no longer be limited to the current deposit maximum.
Banks protect aggregate public funds deposits above the insured threshold through a program that pools collateral posted by participating institutions. In the event of a bank failure, the state can recover public funds by selling this collateral. The Public Funds Collateralization Program for banks is administered by the State Treasury.
Until now, credit unions did not have an option to hold public funds beyond $250,000, but thanks to legislation passed in 2010 and clarified in 2011, the State Treasury has established a collateralization program to protect public deposits at credit unions.
To trigger creation of that program, the law requires a minimum of five credit unions to file materials, including written commitments from government entities to actually make sufficiently large deposits that would exceed the insurance protection level.
Unitus Community Credit Union, Pacific Crest Federal Credit Union, OSU Federal Credit Union, OnPoint Community Credit Union, and Advantis Credit Union all filed the requisite paperwork, and the submitted pledge letters came from the cities of Portland, Beaverton, Corvallis, Independence, and Klamath Falls.
“I want to thank community leaders, legislators and credit unions who have worked long and hard to create this new avenue for state and local deposits,” said State Treasurer Ted Wheeler. “Oregon governments of all sizes now will have the ability to deposit public money in many of our fine community credit unions with the appropriate safeguards."
The interest in accepting public funds clearly extends beyond the initial five credit unions, as five additional credit unions will participate when the program is operational next year: Maps Credit Union, Northwest Community Credit Union, Old West Federal Credit Union, Wauna Federal Credit Union, and Oregon Community Credit Union.
Seven other credit unions helped supply start-up funding: Mid Oregon Credit Union, Valley Credit Union, Northwest Preferred Credit Union, Clackamas Community Credit Union, Rogue Federal Credit Union, Rivermark Community Credit Union, and Oregonians Credit Union.
“Credit unions are safe and sound harbors for government deposits. They are local and committed to their communities,” said Troy Stang, president and CEO of the NWCUA. “We wish to thank our credit unions and the Oregon Treasurer’s office for working with the Northwest Credit Union Association to make it possible for public entities to have a choice to deposit their funds in local member-owned financial cooperatives.”
The amount of required collateral from each credit union will hinge on how much money each institution has in total deposits and outstanding loans. The minimum collateral requirement can range from 10 to 110 percent of uninsured public funds deposits, depending on the capitalization level of the credit union and the number of participating credit unions in the program.
News of the progress in the public funds arena was timely for attendees of the NWCUA’s 2012 Convention, currently underway in Vancouver, Wash., as Andrea Belz, public funds manager at the Oregon State Treasury, and Patrick O’Claire, finance director for the city of Beaverton, were on-hand Wednesday for an afternoon panel discussion that also included Bernie Brixius, COO of Central Minnesota Federal Credit Union. The panel walked attendees through the benefits of participating in a public funds pool, outlined ways to approach a municipality, and explained the details of new Public Funds Collateralization Program for Credit Unions.
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