California's new treasurer wants to spread the state's funds around to more community banks.

Though all California banks are eligible to solicit deposits from the state's short-term money fund, only 38-out of more than 350-currently do so, according to Treasurer Peter Angelides.

Mr. Angelides, who spoke to community bankers in Sacramento last week, said spreading deposits to more independent banks could benefit underserved areas throughout the state.

"I have a very strong interest in helping out community banks because, in the end, they are fundamentally important to California's economy," said Mr. Angelides, who began his four-year term in January. "They are committed to making loans in the state."

The state has $2.1 billion earmarked for banks under a time-deposit program. Mr. Angelides said most banks do not know about these funds but that he intends to spread the word by visiting community banks and attending statewide financial workshops and conferences.

The California Independent Bankers applauded Mr. Angelides' support of community banks. "We couldn't be more thrilled about the prospects of working with the state treasurer," said Craig Hudson, the group's executive director. "We hope this is the beginning of a great relationship."

Bankers say state funds could help institutions that lack a sufficient funding base to make more loans, especially where there is pent-up credit demand.

"It has become harder for community banks to find sources of liquidity," said Candace Wiest, president of $70 million-asset Inland Empire National Bank in Riverside, Calif. "If small businesses continue to grow in California, banks will need access to funds."

There appears to be plenty of money to go around. With the resurgence of the California economy, time-deposit funds have swelled more than tenfold in the past five years.

Only banks headquartered in California are eligible for the time-deposit money. A bank cannot request funds that exceed its equity, and any deposit over $100,000 must be backed by 110% collateral, such as U.S. or California bonds.

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