SPRINGFIELD, Ill. - Six credit unions received almost $83 million in new deposits from the state Treasurer's Office under a plan to infuse as much as $1 billion into Illinois banks and credit unions.
Charles Walker, chief financial officer of Citizens Equity First CU, which received $25 million, says even though the $3.6-billion credit union is well capitalized and profitable, they accepted the low-cost funds because it will help fund additional lending.
"We've had a partnership with the state of Illinois for many, many years. They've had funds on deposit at CEFCU for a long time," Walker told Credit Union Journal. "They asked us if we could use the funds. They said they had funds available at a better yield, at a favorable rate."
Under the terms of the program, CEFCU will pay the state 3.17% for a one-year term on the deposits.
Kati Phillips, a spokesman for the Treasurer's Office, said any state-or federally chartered bank or credit union with a presence in Illinois is eligible, except those receiving funds under the U.S. Treasury's Troubled Asset Recovery Program. The maximum deposit is $25 million under the program.
The funds are particularly targeted at healthy institutions. "That's the point, we don't want to deposit into institutions that aren't going to be around," said Phillips.
CEFCU, for example, has $32 million in net income for the first three quarters of the year and net capital of almost 11%.
Other credit unions receiving state deposits in the last week are: Consumers Cooperative CU ($25 million); Motorola Employees CU ($18 million); Scott CU ($9 million) Meadows CU ($5 million); and Cornerstone CU ($900,000). Illiana Financial CU has applied for $2 million.
Among the banks, Harris Bank, Amcore Bank and Morton Community Bank are all expected to receive $25 million.
The state has received requests for $195.2 million from 28 institutions and has deposited $168.2 million so far.
Meanwhile, Michigan Gov. Jennifer Granholm unveiled an economic stimulus package for her state that includes making $150 million available to credit unions and banks to provide new loans to the state's small businesses.
Under the plan, the state will purchase certificates of deposit at participating banks and credit unions that commit to lending at least 80% of the money to Michigan businesses.
The plan follows a similar initiative undertaken in Illinois, which is buying depositing up to $100 million of state funds in the state's credit unions and banks.
Gov. Granholm also proposed major budget cuts, as well as plans to keep homeowners facing foreclosure in their homes by freezing foreclosure proceedings for up to 90 days so the homeowner and lender can work out a payment plan.
