Funding Services Overview
PMA Funding provides a variety of Deposit and Collateralization vehicles to develop sound funding solutions for financial institutions. The Firm services over 3,200 public entities that make up one of the largest pools of public funds available. Varied municipality revenue cycles allow financial institutions to take a laddered approach to portfolio planning.
PMA has placed billions of dollars in public fund deposits with financial institutions. Public funds deposits are derived from a variety of political subdivisions including school districts and municipalities. Through its financial planning and cash flow programs, PMA can help a public entity match its assets to its liabilities, creating a predictable, defined investment plan. PMA is then able to coordinate with financial institutions to place investments based on each political subdivision’s cash flow plan.
The benefit to the public entity is the ability to invest available resources to maximize return through duration with no added risk. The benefit to financial institutions is a stable, low cost source of deposits.
Having a variety of reliable funding sources is critical for managing liquidity both from a primary and contingency funding plan. Regulators insist banks be able to identify, measure, monitor and control liquidity risk in a timely and comprehensive manner. Through PMA’s funding program, clients can establish funding targets to be maintained through a diversified client base utilizing cost effective funding vehicles available to meet funding needs.
Funding Philosophy
The philosophy of PMA Funding originated from understanding the health and welfare of financial institutions and breaking down that knowledge in order to manage portfolio risk, diversification, and yield. Having long standing data of both historical balances and investment behavior of the public entity sector, PMA has applied this knowledge to bridge the needs of both financial institutions and public entities in a strategic methodology that suits all parties.
PROGRAM, NOT DEPOSIT PHILOSOPHY
PMA’s Bank Funding team works closely with the client to customize laddered maturity portfolios and stable money market programs to address funding needs, both from a primary and contingency standpoint.
COMPREHENSIVE APPROACH
PMA Funding is changing the way banks view funding by taking a comprehensive approach that combines quantitative analyses with direct access to multiple funding solutions. PMA works closely with the banking trade organizations to understand regulatory developments and legislative issues.
Funding Sources
PUBLIC FUNDS
Having a variety of reliable funding sources is critical for managing liquidity. Regulators insist banks be able to identify, measure, monitor and control liquidity risk in a timely and comprehensive manner. PMA Funding helps more than 1,000 financial institutions accomplish this through stable, consistent and flexible deposit solutions.
WHAT ARE PUBLIC FUNDS DEPOSITS?
Public funds deposits are derived from a variety of political subdivisions including school districts and municipalities. These entities are a vital part of their communities and often rely on PMA and their local financial institutions to aid in the development and implementation of sound, proven investment strategies.
COMMUNITY GROWTH—THE PMA DIFFERENCE
Through its financial planning and cash flow programs, PMA can help a public entity match its assets to its liabilities, creating a predictable, defined investment plan. PMA is then able to coordinate with financial institutions to place investments based on each political subdivision’s cash flow plan. The benefit to the public entity is the ability to invest available resources until the day they are needed and meet expenditure obligations. The benefit to local financial institutions is a stable, low cost source of deposits that helps maintain economic growth.
A DIVERSIFIED FUNDING SOLUTION
The Problem: Occasionally, local financial institutions are limited from participating in political subdivision deposits due to the cyclicality risk commonly associated with public funds deposits. That is, their deposit base decreases as liabilities come due, and increases as assets (tax dollars) are received. This does not typically provide a steady, core deposit base for financial institutions.
The Solution: PMA Funding may be able to provide a solution to cyclicality risk through its vast network of public funds deposits that spans beyond your local community. Because these entities have varied revenue cycles, banks can now take a laddered approach to their portfolio planning. This gives banks the ability to mitigate the “sawtooth effect” of public funds deposits by replenishing diminished public funds with those from other political subdivisions.
BENEFITS OF PUBLIC FUNDS DEPOSITS THROUGH PMA FUNDING
Funds generated from political subdivisions are a stable and flexible tool for helping financial institutions overcome the challenges of today’s economic environment. Benefits include:
- defined cash flows and known revenue streams;
- year-round access to a vast source of funds from school districts and municipalities;
- varied revenue cycles allow for a laddered approach to portfolio planning;
- flexible terms ranging from 30 days to two years;
- same-day settlement;
- small- and large-block deposit options;
- no additional fee above stated rate;
- deposits opened and titled in the name and tax ID number of the school district or municipality;
- FDIC insured and/or collateralized options.
Funding Sources
LOCAL GOVERNMENT INVESTMENT POOLS
PMA is a leading provider of administration, distribution and fixed rate investment program services to local government investment pools (LGIPs).
PMA tailors administration services to meet the needs of each specific LGIP and preserve the identity of each program it services. This includes private label branding of marketing and transaction websites as well as custom marketing collateral and supporting documents for each program.
PMA currently works with multiple LGIPs and offers a unique set of services designed to increase assets and participation.
SERVICES
Participants in PMA-administered LGIPs have access to a range of cash management and investment services designed specifically for school districts, community colleges and municipal entities. These include:
- Banking and Cash Management
- Cash Flow Management (CFLO)
- Bond Proceeds Management (BPM)
- Money Market and Liquid Investment Options
- Fixed Income Trading
- Credit Analysis
For more information on PMA LGIP services, click HERE.
WHY PARTICIPATE?
In addition to the cash management and investment services available to Participants, LGIPs also benefit from:
- Tailored Marketing Services
- Advanced Trustee, Client and Vendor Reporting
- Competitive Fixed Rate Programs
- Accounting Services
- Client and Vendor Interaction
Funding Sources
INSTITUTIONAL INVESTORS
Through the investment of political subdivisions for over 35 years, PMA has been able to establish an expansive banking partner network which has allowed the company to be both a consistent funding source for financial institutions as well an investment provider for institutional investors. Typical institutional investors consist of regional banks, community banks and credit unions which look to invest excess funds to respective target need dates in order to earn more meaningful returns than if the monies would remain liquid. The main benefit to PMA’s institutional clients is that they have the ability to access a large array of fixed income CD product options through one trusted PMA advisor.
WHO ARE THE ISSUERS?
On a weekly basis, community and regional institutions look to raise deposits that can complement their core market and maintain their contingency funding balances for their institution. Since typical core deposits require considerable operational commitment, as well as marketing and collateralizing costs, these institutions look to PMA as an effective route to raise large block funding in a quiet fashion. PMA will work with each institution in matching their specific funding needs with the investment needs of the institutional investor.
PMA DIFFERENCE
Through PMA’s experienced bank funding advisors and efficient investment platform, institutional investors have the ability to generate attractive returns from fixed income investments that are unique to the marketplace and established solely through PMA’s system and network. PMA coordinates with financial institutions each week to place investments based on each institutional investor’s investment horizon and provides product solutions that are relevant for individual investment policy and financial environment.
The greatest benefit to institutional investors consists of the uniqueness of PMA’s product base as well as the company’s capacity to provide an extensive product listing on one investment platform. A problem that many investors face with typical dealers is that their issuer offerings are primarily consisted of regional banks or institutions without a branch presence or issuers that are consistently in the market. These issuer names will often provide above market yields because of their limited overhead, but the investment insurance will still remain under the FDIC insurance of $250,000, so it limits the investment capabilities. The larger institutional investor will have problems with this approach because they will quickly exhaust their FDIC insurance with the top issuer offerings and will be left with limited options for the remaining investments. A consequence they often face is that they will be forced to search for other types of fixed income products besides CD’s, which may result in increased credit risk or reduced liquidity to their investment portfolio. In addition, remaining issuers that are left to invest on the street will consist of institutions that are seeking to raise funds only at a bargain price, which will lower the overall weighted return of the portfolio.
The advantage of working through PMA will be through a customized and tailored portfolio that is provided to the investor as well as the access to the growing network of banks that have been built out for more than 35 years. Through the combination of PMA’s trusted partnerships, technological efficiency and expansive product line, institutional investors have the ability to work with a full service broker deal that has the ability to invest institutional portfolios of several hundred million dollars in size.
BENEFITS OF WORKING THROUGH PMA FUNDING
Investments provided to institutional investors are stable and flexible to provide the most effective investment solution for their portfolio. Benefits include:
- Competitive rates of return
- Year-round access to a multitude of investment options
- Flexible terms ranging from 3 months to 10 years
- Daily and weekly settlement
- Small- and large-block investment options
- No additional fee above stated rate
Credit Analysis
In the early 1980s, Dr. Robert English, founder of PMA Financial Network, LLC and former public funds officer, developed an innovative credit report that ascertains the health of financial institutions utilizing fundamental analysis and a robust knowledge of the banking industry. Each credit report was created according to a proprietary quantitative and qualitative model that addresses factors of importance to depositors, as well as banks (e.g., statute compliance, safety, liquidity, yield, etc.). Today, finance officials and banks across the country continue to use and benefit from Dr. English’s first-of-its-kind and time-tested analysis.
DELIVER PMA BANK PROFILE
In 2009, PMA evolved its credit report to serve as a source of bank- and peer-level information for community bankers. This new PMA Bank Profile:
- takes an analytic view at the funding condition of a community bank;
- identifies warning signs and funding “triggers”;
- serves as an advisory tool for PMA Bank Funding Advisors;
- provides insight into appropriate funding solutions.
ACCESS TO PMA’S CREDIT RISK MANAGEMENT TEAM
In recent years, banks have been navigating margin pressure, loan write-downs, changing deposit trends and increased compliance costs, all while managing through new regulations and increased regulatory scrutiny. As such, PMA offers its clients direct access to its Credit Risk Management Team, which assists a community bank by utilizing ratio and fundamental analysis to determine a bank’s overall funding condition. This can serve as a valuable asset when developing and maintaining a healthy contingency funding plan.
For more information on PMA credit analysis services, click HERE.
