CEOs Map Strategies for Deposit Rush
GLENDALE, Calif. — CEOs around the country are already mapping strategies to deal with any surge in deposits.
Stuart Perlitsh, CEO of Glendale Area Schools FCU in Glendale, Calif., already is making plans to discourage deposits, especially after it became very clear consumers are unsettled by sudden turbulent economy. "We are getting calls from members since Monday when we opened, asking if their money safe, what is the credit union's insurance coverage, and if they can bring over the money they have in stocks."
The $300-million CU plans to "significantly" reduce dividend payouts. "We want to slow our deposit growth, so we plan to cut our rates for the second half of the year and keep them there through 2012."
Perlitsh reminded that NCUA assessments are based on deposits. "So it's a disincentive now to grow deposits. On every dollar in deposit growth you are paying the NCUA a tax. This explains why some credit unions in Nevada last year were paying people to take out their money. They were not visionary, they were clairvoyant."
Stewart Ramsey, CEO of Fort Campbell FCU in Clarksville, Tenn., confirmed that his CU is in no position to take in a lot more money. "We already brought in a bunch of deposits and our concern, of course, is no one is borrowing. We will have to look at lowering our deposit rates because we do not need this money to come in. The mega banks are beginning to charge those who make large deposits. As this recession unfolded I kidded with our board that the day would come when people would pay financial institutions to make a deposit-now that day is here."
Jeff Disterhoft, CEO the University of Iowa Community CU in Iowa City, Iowa said credit unions will benefit from the current economic unrest only if they have a need for funds. "Short of that, you could see credit union balance sheets become a little inflated and given the relatively low yield found in most of our investment portfolios, spreads could face pressure."