Funding stability has become a strategic imperative rather than a tactical consideration.
Anticipated interest-rate changes, sustained competition for core deposits and an evolving regulatory environment have reshaped how banks evaluate funding decisions. Deposits from municipalities, school districts and other political subdivisions are gaining recognition as a durable, relationship-driven funding vertical with long-term strategic relevance.
Public funds occupy a distinct position within the wholesale funding ecosystem. Public funds are governed by statute, influenced by fiscal calendars and anchored in fiduciary responsibility. Public entities typically prioritize safety, transparency and operational reliability alongside yield, resulting in funding relationships that are often less reactive to short-term market dislocation. When structured appropriately, public funds can behave differently than traditional wholesale or brokered deposits and contribute meaningfully to balance-sheet stability across interest-rate cycles.
From a CFO perspective, one of the key advantages of public funds is predictability. While balances fluctuate based on tax collections, budget cycles and capital expenditures, these movements are generally visible and planned. When incorporated into liquidity forecasting and stress testing, public fund balances often exhibit more stable behavioral characteristics than other large-balance funding sources. In addition, public entities tend to value continuity of service, supporting longer-duration relationships through changing rate environments.
Public funds, however, require disciplined oversight. Concentration risk can develop when multiple public entities share similar fiscal calendars, creating correlated inflows and outflows. Collateral requirements, whether through pledged securities or Federal Home Loan Bank letters of credit, also introduce balance-sheet and liquidity considerations that must be actively managed.
Diversification enhances the strategic value of public funds. Many institutions diversify across geography, fiscal cycles and access points. In addition to direct municipal relationships, banks may access public fund deposits through advisors and state-authorized local government investment pools (LGIPs) and similar structures that aggregate public deposits and redeploy them across qualified institutions. These approaches can help smooth seasonal volatility, broaden funding sources and improve overall liquidity consistency while continuing to support public-sector clients.
Regulatory clarity remains essential. Ongoing refinements to brokered versus non-brokered deposit definitions have increased the importance of accurate classification and documentation. Misclassification can result in higher FDIC insurance assessments and supervisory challenges. Banks that maintain clear governance around how public funds are sourced, classified and collateralized are better positioned to deploy these balances confidently.
Ultimately, public funds should not be viewed as opportunistic or seasonal deposits. When integrated with structure, diversification and discipline, they can serve as a strategic anchor within a modern wholesale funding framework—supporting liquidity, managing risk and promoting balance-sheet resilience across economic cycles.
PTMA Funding – Your Partner in Institutional Deposit and Funding Strategy
When should your community bank partner with PTMA Funding?
Competition for stable deposits
Access additional deposit sources to support current or projected liquidity demands.
You’re exploring new funding sources
Explore alternatives to FHLB advances, brokered CDs, and rate boards, without disrupting core deposits (quiet funding).
You’re enhancing your funding strategy
Strengthen both primary and contingency funding options to improve stability and adaptability in changing economic conditions
Ready to Diversify Your Deposits with Confidence?
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Disclaimer
PTMA Funding is a service of PMA Financial Network, LLC and PMA Securities, LLC. DTC eligible CD execution is provided by PMA Securities, which is a member of FINRA and SIPC. For issuer use only. Not to be distributed to members of the public. Public Trust Advisors, LLC, PMA Financial Network, LLC, PMA Securities, LLC and PMA Asset Management, LLC (collectively “PTMA”) are under common ownership. Public Trust Advisors, LLC and PMA Asset Management, LLC, are both SEC registered investment advisers. PMA Securities is a broker-dealer and municipal advisor registered with the SEC and MSRB and is a member of FINRA and SIPC. Registration with the SEC does not imply a certain level of skill or training. Marketing, securities, institutional brokerage services and municipal advisory services are offered through PMA Securities, LLC. All other products are provided by PMA Financial Network, LLC.
For more information visit https://ptma.com/.
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