30 MARCH / APRIL 2018 Brett J. Ashton Partner Krieg DeVault LLP Submit Compliance Connection questions to Joshua A. Myers, Indiana Bankers Association: jmyers@indianabankers.org. Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. Article author COMPLIANCE CONNECTION Public Depository In a county with no office or branch location This information is provided for general education purposes and is not inXIRHIH XS FI PIKEP EHZMGI 4PIEWI GSRWYPX PIKEP GSYRWIP JSV WTIGMƤG KYMHERGI as to how this information applies to your institution’s circumstances or situation. Question: My bank currently holds public deposit accounts for our county hospital and our headquarter town. We would like offer these services to other political subdivisions. Does Indiana law prohibit us from acting as a public depository to entities in adjoining counties if we don’t have a FVERGL SJƤGI MR XLEX GSYRX]# ;LEX MJ XLI TSPMXMGEP subdivision we want to offer services to is three GSYRXMIW E[E]# Answer: While Indiana law generally prohibits a financial institution from acting as a public depository in a county where it doesn’t have a principal office or branch location, there are exceptions to this rule, even if the political subdivision in question is three counties away. Ind. Code § 5-13-1 et. seq. governs the investment of public funds. A county or political subdivision may deposit public funds in a financial institution, only if the financial institution is a depository eligible to receive state funds, and has a principal office or branch that qualifies to receive public funds.1 Ind. Code 5-13-8-9(a) provides: “[a]ll public funds of all political subdivisions shall be deposited in the designated depositories located in the respective territorial limits of the political subdivisions, except as provided in this section.” The ability of a bank to receive public deposits in adjoining counties where they do not have branch locations will depend on the number of other depositories currently offering services within the territorial limits of that county or political subdivision. If there are no other financial institutions with principal offices or branches in the county or political subdivision, or none willing to accept public funds, the board of finance of the county or political subdivision may designate one or more financial institutions with a principal office or branch location outside their territorial limits to act as a depository.2 If only one financial institution that has a branch or principal office in a county or political subdivision is willing to accept public funds, the board of finance for the county or political subdivision may treat the financial institution that is located within the county or political subdivision as if it were not located there, and designate one or more financial institutions to receive its public funds.3 There is an exception to these restrictions for deposits from a county or municipal hospital. Trustees for qualified hospitals are permitted to invest money in their hospital funds anywhere in the state, with any financial institution designated by the State Board of Finance as an authorized depository.4 The Board for Depositories maintains a list of all approved depositories eligible to accept funds that can be cross-referenced with market presence to determine whether a county or political subdivision is authorized to approve an out-of-territory bank. When reviewing a market for potential opportunity, don’t forget that a credit union is also a financial institution, eligible to accept public deposits under Indiana law.5 HB 1Ind. Code § 5-13-8-1 2Ind. Code § 5-13-8-9(c) 3Ind. Code § 5-13-8-9(e) 4Ind. Code § 5-13-8-9(d) 5Ind. Code § 5-13-4-10(6)
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