Pub. 6 2016 Issue 2

D E POSITS FROM PUBLIC FUNDS ARE BECOMING AN INCREASINGLY IMPORTANT SOURCE OF FUNDING FOR MANY COMMUNITY BANKS, AS MORE AND MORE GOVERNMENT ENTITIES HAVE BEEN MOVING THEIR deposits out of the country’s largest banks as a result of new LCR requirements at these large institutions. As of Q4 2016, more than half of the deposits from Federal, state and local government entities were placed in banks with less than $50 billion in assets, up XX% from the same time in 2015 (FDIC Statistics on Depository Institutions). Public Fund Deposits Held at Banks Above and Below $50 Billion Across the United States, local and state governmental entities use Promontory’s reciprocal deposit services to access multi- million-dollar FDIC insurance through a single banking relationship. In this way, they are able to safeguard taxpayer money, keep funds local, and eliminate the burden of ongoing collateral tracking. Because of shifting factors in the banking industry, public fund deposits are becoming more available to community banks. Now is a time when many government finance officers are considering shifting investments out of money market funds into bank deposits. It is also a time when many of the nation’s largest banks do not want public fund deposits, as new regulations raise the cost of public unit deposits to large banks (but not to smaller and mid-sized banks). Increased availability of public deposits, reduced price competition for these funds from large banks, and fewer alternatives for government finance officers may provide an opportunity to community banks, particularly those who of- fer CDARS® and ICS® to their public fund customers. And here is more good news — today, 49 states have laws that enable governmental entities to protect deposits through CDARS, and 47 states have laws enabling Insured Cash Sweep®, or ICS. See the infographic below, for the average Insured Cash Sweep and CDARS outstandings as of the quarter-end for each of the four quarters in 2015 for applicable states: About Promontory Interfinancial Network Promontory is the leading provider of FDIC-insured deposit placement services. Their services include Insured Cash Sweep®, CDARS®, IND®, and Yankee Sweep®, which enable banks and other financial institutions to build strong, multi-million-dollar relationships, replace higher-cost deposits, reduce collateralization, and purchase cost-effective funding. For more information about Promontory and its services visit Promnetwork. com or call (866) 776-6426. Take Another Look at Public Fund Deposits w 12 www.azbankers.org