Dedicated to Deposits: Deals, Data, and Discussion

Patelco Credit Union Applies for Federal Insurance

POSTED ON BY

Patelco Credit Union
It has been reported by the Credit Union National Association, that Patelco Credit Union has applied to the NCUA for federal insurance. The application is currently pending approval by the NCUA.

Since November 2002, Patelco has been insured by the private insurer, American Share Insurance (ASI). According to the article, one big reason for the switch was the recent increase of IRA insurance coverage from $100K to $250K. Other reasons mentioned included reduced cost for the deposit insurance and fewer limitations in working with federal agencies that are closely involved with mortgage handling.

According to the article, Patelco is the largest credit union to have private insurance. Their financials as of 6/30/07 are available at the ASI page. Patelco has $4.28 billion in assets.

I'll be glad when Patelco gets back NCUA insurance coverage. There's something about federal insurance that provides confidence that insured deposits will be covered no matter what the future may bring. Private insurance just doesn't have the same weight in my opinion. Also, federal insurance is a very understandable mark of a financial institution's legitimacy. It's easy for those who don't follow these issues to understand that a credit union is legitimate when they see it's covered by the NCUA.

Patelco has a history of some great deposit deals. Please refer to my last Patelco post for some of their latest CD deals. It'll be nice to report on future Patelco deals without having to explain this ASI vs. NCUA issue.

Thanks to the readers who informed me of this news.

Related Pages: Patelco Credit Union

Related Posts

Comments
21 Comments.
Comment #1 by Anonymous posted on
Anonymous
You mention Patelco "getting back" NCUA insurance. I assume this means it once had it--which brings me to the question of whether any or all CU's can abandon NCUA coverage at their whim. I had never really seriously considered that a CU with which I had existing CD's could simply drop the NCUA coverage. I will try to get an answer, and will let you know.

1
Comment #2 by SVG (anonymous) posted on
SVG
 

Anon,

>>You mention Patelco "getting back" NCUA insurance. I assume this means it once had it<<

Indeed ... few years ago Patelco had NCUA insurance.


>>which brings me to the question of whether any or all CU's can abandon NCUA coverage at their whim.<<

It takes more than whim ! *smile*

What it takes a majority vote approval by the owners of the CU (read members of the CU).


>>I had never really seriously considered that a CU with which I had existing CD's could simply drop the NCUA coverage.<<

Doing the proxy voting is not a simple matter.

- SVG

 

1
Comment #3 by SVG (anonymous) posted on
SVG
 

Banking Guy,

>>I'll be glad when Patelco gets back NCUA insurance coverage. There's something about federal insurance that provides confidence that insured deposits will be covered no matter what the future may bring.<<

Me too. It will be nice if NCUA coverage is obtained back.

Every time I open a certificate with Patelco I take a pause. This won't be necessary if the NCUA coverage is obtained.

- SVG

 

1
Comment #4 by Anonymous posted on
Anonymous
I have been a customer with Patelco CU for probably at least 10 years. I remember when we voted for the private insurance that they have now. They told us of the greater coverage $250K versus only $100K. Sounded good to me at the time and I voted yes. I am happy to hear that they will be "getting back" to NCUA insurance after reading this article.
I have my IRA's with Patelco and at my age I have the monthly minimum requirement payout. They have very good service and also some good CD rates though the years.

1
Comment #5 by Lance (anonymous) posted on
Lance
Patelco has had some awesome rates considering they allow just about anyone as members. I'm more than thrilled to see them going back to NCUA. I'll be able to deposit funds into their CD deals again. Previously I had refrained from their CD deals because of the lack of NCUA insurance.

Smart move Patelco! I'm sure they'll be getting a lot of business again from new and old customers.

1
Comment #6 by Anonymous posted on
Anonymous
When I posted my comment at 5:47 PM today, I had not read the many Patelco website FAQ's explaining why NCUA insurance was dropped in 2002. Also, the website FAQ explanations made it appear that dropping NCUA in 2002 was a Board decision.

I now understand from SVG that member proxies were involved. What I do not know is whether the Board at Patelco had to go the members for approval, or whether the Board just chose to do so.

I also am concerned about my ignorance with respect to "other than Patelco" credit unions. Assuming Patelco was legally required to get member approval to drop NCUA, I nonetheless am concerned that other CU's may not be so constrained.

"Getting back" to NCUA will result in a reduction of Patelco insured accounts involving hundreds of millions of dollars, unless Patelco obtains private excess insurance over the NCUA limits.

The Patelco FAQ's say the year 2002 Patelco dropping of NCUA--in favor of private insurance--was intended to allow covering all (not just IRA) accounts for $250,000 each.

Based on my apparent ignorance of how hard or easy it may be for CU's to drop NCUA deposit insurance coverage, I will in the future be more inclined to choose banks with FDIC coverage rather than CU's.

The last comment is based on the hopefully correct assumption that banks cannot under any circumstances drop existing FDIC coverage.

1
Comment #7 by ShraZZy (anonymous) posted on
ShraZZy
What's a Community Charter? I live in one of the places they put, but I don't get what's a Community Charter. Also how's their online accounts? Any trouble with CDs?

1
Comment #8 by Anonymous posted on
Anonymous
Thank you Banking Guy for this great news!

As long standing Commitment Household members (invested in IRA & non-IRA products), our family voted against private insurance.
We stayed with Patelco because of their terrific friendly service.

In these most turbulent times, especially, it will be a very comforting relief to know the Insurer of our funds owns the 'printing press' ;-)

Let us all pray that Patelco's Application for Federal Insurance coverage for it's member deposits will be approved sooner rather than later.

BRAVISSIMO PATELCO FOR THIS WISE CHOICE!!!

1
Comment #9 by SVG (anonymous) posted on
SVG
 

Anon, Lance,

I'm not 100% sure 'bout this ... but as I recall ... Patelco left NCUA when 'someone' high-up at Patelco initiated the move to push away NCUA.

That 'someone' actually had left NCUA and joined-up Patelco !

Do you folks recall something like that ?

- SVG

 

1
Comment #10 by Anonymous posted on
Anonymous
How timely this article - a few days ago after checking my local CU for their pitiful CD and share rates - yet again, I clicked over a couple of pages to read more about the board of directors... what a joke! These guys only had one member (the chair) that even had what looked to be a formal degree in banking or finance - the rest were all retired from this or that association or were currently in positions outside of finanace altogether - as in - Joe Blow is the assistant station chief at Fire Dept. #6! although they are with NCUA, it's no wonder our deposits have hovered at about 600 million for the past... forever - and did I mention the pitiful CD rates =) I gotta move some money like yesterday!

1
Comment #11 by Anonymous posted on
Anonymous
Credit union board members are elected from the members of the credit union. The board members are typically managers from the original sponsoring companies.

1
Comment #12 by Anonymous posted on
Anonymous
When I found Patelco, they were displaying the NCUA insurance symbol on their website. Looked them up on the NCUA site as always
http://www.ncua.gov/indexdata.html .

They were going off Federal insurance the next week! Needless to say, I have never put any money in Patelco.

Patelco was the biggest of the few CUs using American Share Insurance. They were 20% of the whole thing! If they had gone under, the few other CUs using ASI would have had to pony up a lot of money or the private insurance company would have gone under.

1
Comment #13 by Anonymous posted on
Anonymous
Most CUs that have private insurance get it as a supplement to the Federal insurance to cover large account holders.

It is unusual for a CU to completely drop Federal coverage. Makes you wonder if they were operating in a way that might not pass the NCUA audit.

1
Comment #14 by Anonymous posted on
Anonymous
svg:

You are right! Ed Callahan cenceled NCUA & went with ASI.

http://cutimes.com/article.php?article=34465

1
Comment #15 by Anonymous posted on
Anonymous
They were doing subprime. Perhaps that's why they switched to private insurance

Credit Union Journal | Tuesday, August 21, 2007

SAN FRANCISCO –PatelcoCU said yesterday it has erased the red ink that plagued it in 2006 and earned net income of $11.9 million for the first seven months of 2007. The privately insured credit union giant, in response to an article in yesterday’s Credit Union Journal Daily Briefing about its troubled subprime auto loans, said it holds no subprime consumer or mortgage loans.

The $4 billion credit union, which reported an $8.3 million loss for fiscal 2006, said its net worth remains strong with $419 million in capital.

Patelco, the nation’s largest privately insured credit union, sold its subprime auto loan portfolio after realizing some $40 million in losses.

"Given today’s credit market, that move has proven to have been fortuitous, ahead of the economy," said Patelco President Andrew Hunter, in an email message. The subprime auto loan losses, similar to those being accrued by other credit unions, were notable because they were unrelated to subprime lender Centrix Financial, which have plagued dozens of other credit unions. Patelco sold its subprime auto loan portfolio to CompuCredit Corp., a subprime lender which had acquired ACC Consumer Finance, which was partially owned by Patelco.

1
Comment #16 by Bozo (anonymous) posted on
Bozo
I have a modest CD ($50,000) with Patelco at 5.75% which matures in six months or so. Currently, their rates are OK (5.5% APY for 9 months), not stellar, but competitive. I assume obtaining NCUA insurance will boost their inflows, but decrease their rates.

But, then, I am of the old school. Anything over 5% APY is a gift. All my retirement projections are based on a 5% yield and a 4% withdrawal.

Yours,

Bozo

1
Comment #17 by Lance (anonymous) posted on
Lance
Bozo, according to Patelco, it shouldn't cost more to switch to NCUA. In fact, it's suppose to cost less. NCUA insures less than private insurance, but it guaranteed by the federal government. Private insurance is suppose to guarantee more but who knows if they can really pay up when the time comes.

I suspect the rates will be lower however as they needed to offer a higher rate for people to take the risk of depositing their money at Patelco without NCUA coverage. In the futre, if and when Patelco obtains NCUA coverage again, they won't have to pay a premium to acquire customers as they'll have NCUA insurance.

Of course I'm hoping they continue on offering very competitive rates.

1
Comment #18 by bojwa (anonymous) posted on
bojwa
I just joined Patelco CD for $1000 which is a bargain at 7%.
They did not even ask me to pay %5 membership dues and opened a free share account for $1.

1
Comment #19 by Anonymous posted on
Anonymous
Switching between federal and private insurance depends on the credit union's charter.

A credit union chartered by the NCUA will always have federal insurance. Federal charters will have the word "federal" in their name.

A credit union chartered by a state will not have "federal" in their name, but will most often have federal insurance. There are several states that do allow their credit unions to use private insurance either as primary or supplemental coverage on deposits. Unfortunately I don't remember those states offhand.

Switching from federal to private insurance and vice versa requires the approval of the state chartered credit union's state regulator. Switching should not be an issue with a credit union that is federally chartered.

The link below on NCUA's website provides some additional information on the different charters.

I hope this helps.

http://www.ncua.gov/AboutNcua/ncua_faq.html

1
Comment #20 by andihce (anonymous) posted on
andihce
Concerning the original Patelco transition from NCUA to private insurance, the vote for private insurance was 61% in favor, 39% opposed (66,000 members responding).

My question is, what do you do if you want to open non-IRA certificates significantly exceeding the NCUA insurance coverage at a single institution?

You can get some modest multiplication of the $100,000 limit with say POD but that (and joint certificate ownership for those it applies to) come with issues of their own.

Patelco has offered some excellent rates in the past, and present insurance, as I understand it, covers $250,000 per account (open as many as you wish).

1
Comment #21 by Anonymous posted on
Anonymous
Sorry, my long URL was truncated.

Search google for "NCUA's Matz Raises Concerns Over Moves To Private Insurance" and choose the result leading to www.accessmylibrary.com.

I didn't think I should post the article as it is long and carries a copyright citation.

1