State purchases deposit certificates State Treasurer Vernon L. Larson announced Jan. 7 that the state purchased certificates of deposit worth $34,284,000 on Dec. 31, from banks, savings and loans and credit unions in South Dakota under a program authorized by the South Dakota Investment Council.
On Nov. 15, the council authorized up to $35 million to be invested in certificates of deposit in 2003. The state has invested in CDs since the 1930s. The program has been under the authority of the State Investment Council since the early 1970s.
"This year 75 banks, two savings and loans and nine credit unions participated in the CD program," Larson said. "CDs worth $30.5 million were purchased from banks, $1.4 million from savings and loans and $2.3 million from credit unions."
This year's interest rate, based on the rate for one-year U.S. Treasury Notes on Dec. 27, was 1.22 percent, Larson added.
Last year the state purchased $33,408,000 in certificates of deposit from 75 banks, two savings and loans and seven credit unions. The interest rate was 2.24 percent. These CDs matured on Dec. 31.
"Many were simply rolled over and continued with the same institution for the next year," Larson said.
State law allows the Investment Council to invest savings and accounts and certificates of deposit from banks and savings and loans. In 2001 the Legislature amended law to also include credit unions under certain circumstances.
Each fall the State Investment Council decides how much will be offered for investment in certificates of deposit. Banks and savings and loans are then offered an allocation on a pro rata basis of its loans plus South
Dakota municipal bonds to total loans outstanding plus South Dakota municipal bonds in South Dakota banks. Only financial institutions insured by the Federal Deposit Insurance Corporation are eligible. The minimum allocation is $100,000.
From this year's allocation of $35 million, $34.284 million was subscribed by banks, savings and loans and credit unions.
"This is $876,000 more than the total of $33,408,000 invested last year in CDs," Larson said. "Banks and savings and loans took $60,000 more and credit unions took $936,000 more in CDs for 2003 than in 2002."
The object of the certificate of deposit program is to provide investment in financial institutions in the state to make monies available for potential loans to public and private borrowers. Banks receiving funds under the program must post collateral with the state equal to 100 percent of the amount received over $100,000 to ensure safekeeping of the funds. The first $100,000 is covered by federal deposit insurance.
The largest amount this year, $11,421,000 went to Wells Fargo Bank. Other million dollar plus recipients were BankFirst ($1.508 million), First Premier Bank ($1.468 million), Home Federal ($1.325 million) and US Bank($1.437 million) in Sioux Falls and Dacotah Bank ($1.083 million) in Aberdeen.