With rates near all-time lows and costs still rising, it has become so difficult for credit unions to earn a positive spread for their members that Nevada Federal Credit Union is paying members to take their money elsewhere.

"There's virtually no loan demand right now, given the local economy; short-term investments are paying as low as 0.10% to just 0.25%, and we've been told to prepare for an NCUA assessment of anywhere from 15 to 40 basis points — it's a negative spread," said Brad Beal, the $820 million-asset credit union' president.

"It's a whole different deal," Beal said Thursday.

"Never in my life have I seen anything like it. Net yields are in the negative."

Some area credit unions and banks are trying to shrink their balance sheets in similar ways to rebuild capital ratios.

But even after losing $32 million last year, Nevada Fed maintains a strong capital ratio of 8.9%. So shrinking is not its motive, Beal said.

Because negative spreads have pushed its dividend rates on regular shares, share drafts and money market funds to 0%, Nevada Fed has decided to pay members who have only a deposit relationship with the credit union — those that cost more than they pay — to withdraw their funds.

"That's where we're losing money," said Beal, referring to the 1,600 members who have as much as $100 million on deposit and no other relationship with his credit union.

Nevada Fed is offering those members modest payments to withdraw their deposits — $25 for $25,000 to $50,000; $50 for $50,000 to $75,000; and, $75 for more than $75,000 — and will help them place the funds in another federally insured depository for free.

Early withdrawal penalties for certificates of deposit are being waived.

The promotion has succeeded so far in getting members to withdraw a "couple of million dollars" in the last couple of days, according to Beal.

He said he is not too concerned about losing members in the long run.

Most of the depositors that Nevada Federal urged to leave have expressed gratitude for being steered to institutions where they may earn more than 0%, he said.

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