Between year-end 2000 and the first quarter of 2010, share certificates and money market shares went from 41 percent of total shares to 50 ¼ percent of shares. During the same time interval, regular shares slipped from 34 ¼ percent of total shares to 27.6 percent. (See slides 16 and 17 of her presentation).
NCUA views such interest rate sensitive funds, as money market shares and share certificates, as potentially non-core sources of funding. In other words, the prospect of earning a few more basis points could cause these funds to depart the credit union, creating a liquidity issue.
Adding to NCUA’s anxiety is that credit unions are increasing their concentration in long-term assets. Federally-insured credit unions’ net position in long-term assets has gone from 22.67 percent of assets at the end of 2000 to 31.84 percent as of March 2010.
The following table lists the 25 credit unions with at least $50 million in shares as of March 2010 that have the highest concentration of shares in share CDs and money market shares. Evangelical Christian CU has slightly more than 91 percent of its shares in either money market shares or share CDs. (Click on image to enlarge).
One institution on the list, St. Paul Croatian, was seized by NCUA during the second quarter.
At such low dividend/interest rate levels (as needed to continue the bailout of the banks), consumers are trying to get what yield is out there to generate income (which they can spend to help out our stalled economy). Not to mention that the deposit taking market has become more democratic with the ability of the Internet to look at nationwide rates so consumers can get the best rates. I would believe that a bank economist would understand these market issues in conjunction with consumer behavior. But then again, the NCUA is just a "cheerleader" regulatory agency.
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