Nevada Fed Asks Members To Move Money Out Of CU
LAS VEGAS-Nevada FCU has asked a small number of its members who have a savings account-only relationship to move their money to another financial institution.
The credit union has approximately 1,600 such single-relationship members, according to Greg Barnes, SVP-marketing. Like other CUs, Barnes said Nevada Federal is struggling with excess deposits - deposits on which it will have to pay an assessment to NCUA later this year.
"These people have no checking account with us, no mortgage, nothing else. Most are dormant accounts that never do anything," Barnes said. "The rates vary, but on average we were paying about 0.4% on these 1,600 accounts. We are making 0.25% on Treasuries, if we are lucky, so it is a losing proposition."
Forcing the credit union to take action, according to Barnes, was NCUA's most recent advisory that an additional special assessment between 15 and 40 basis points of insured deposits will be charged later in 2010. "What we decided to do is encourage these members to move their money elsewhere," he recalled.
Nevada Fed is incenting the move with a bonus offer. The first letters to members detailing the bonus went out Feb. 24; the second batch was sent March 3. The letters, bearing the signature of President and CEO Bradley Beal, said NFCU has "substantially more money on deposit than we can lend in the current weak economy. As a result, we have adjusted our dividend rates to historically low levels. We want you to earn a higher rate for your money."
For those who agree to move their deposits, for amounts from $25,000 and $49,999, the member will get $25; $50,000 to $74,999, the bonus is $50; for $75,000 and above, $75.
Barnes said Nevada Federal is encouraging members to talk with its investment for assistance in placing their money in federally insured deposits elsewhere.
"So far member reaction has been pretty good, because they understand why we are doing it," he said. "I have heard about one member being very upset. We put a lot of effort into the communication so they would know why. It was one of the most unusual marketing letters I've ever written."
Silver State Schools Eyes $22M
LAS VEGAS-Is a $22-million cash infusion from American Share Insurance enough to right the teetering Silver States Schools CU?
According to the $819-million SSCU's year-end financials posted on the website of American Share Insurance, Dublin, Ohio, which insures the CU's member deposits, the answer may come as 2010 progresses. During 2009 Silver State Schools lost $51 million, with net worth declining to 2.82%, while delinquencies were at 8.19% at year-end. Moreover, in a state in which property values have plummeted, SSCU showed $21.3 million in loan loss reserves for a $740-million loan portfolio as of Dec. 31.
Silver State CEO Dave Rhamy told the Las Vegas Sun the credit union has written off about $36 million in bad loans. Previously, Rhamy stated the support from ASI, which was finalized in February, would be loaned out to generate revenue for the credit union, but has since been quoted as saying the funds from ASI would be put into reserves, instead.
In December, Rhamy projected $6 million to $8 million in net income for 2010, but revised that target, as well, in a published report, expecting a net loss of about $10 million. The CEO said that at worst, the credit union projects it will have to write off $20 million to $22 million in loans in 2010.
Rhamy termed the funds from ASI as a means of bolstering public confidence, and has referred to the assistance as a capital infusion in a letter on the credit union's website. A report in the Las Vegas Sun, however, classified the money as a loan.
Calls by CU Journal to this state's regulator and to ASI to determine the nature of the assistance failed to clarify the matter, both saying the terms of the arrangement are confidential. Rhamy could not be reached for comment.
NCUA Cites CU For Branch Project
RAPID CITY, S.D.-In rare supervisory action, NCUA yesterday issued a cease and desist order directing Rapid City Telco FCU to halt construction on its new branch, near the presidential monuments Rushmore Crossing shopping center, or any additional fixed assets without NCUA approval because the $47-million CU has exceeded the agency's fixed assets rule. The order directs the CU to cease paying for any expenditure related to the project and to submit all bills for approval. The order also requires the CU to submit a plan to bring it into compliance with the rule. Among the options the CU must consider are: termination of the Rushmore Crossing lease; reduction of all planned purchases of furniture and equipment for its facilities; the sale of its new Hills City branch; or, request a waiver of the agency's fixed asset rule.
