Update on ASI-Only Credit Unions - Higher CD Rates Worth the Risk?
One issue regarding credit unions that many people don't realize is that not all credit unions are federally insured. A small number only have private deposit insurance through the company American Share Insurance (ASI). I did a long review of ASI in a post from last year, Your Credit Union May Drop Federal Deposit Insurance. I thought it would be a good time to provide an update on the issue of ASI deposit insurance. Also, there's another case of an ASI-only credit union that's offering some very competitive CD rates. You'll have to judge the safety of ASI and the institution to decide if you want to take advantage of these CDs.
ASI Deposit Insurance for Credit Unions
It has been over a year since I published the post, Your Credit Union May Drop Federal Deposit Insurance. It described how a Texas credit union tried to switch from federal deposit insurance via the NCUA to this ASI private deposit insurance. Velocity is the Texas credit union that tried to make this switch. Here's a time-line of what happened at Velocity:
- September 2009 - Velocity CU sent letters informing members that the board approved plans to change its deposit insurance to ASI. They recommended members vote for this conversion in an upcoming election (required for the change). The main reason cited for this change was NCUA's higher premiums that it was charging credit unions to help pay for the corporate credit union bailouts.
- December 2009 - Velocity CU members vote and approve the conversion plan to ASI
- January 2010 - Velocity CU releases voting results
- February 2010 - Velocity CU changes its mind. In a letter to members, Velocity's president described that they changed their minds due to the ASI assessments that were similar to those charged by the NCUA.
The assessments that ASI started to charge showed that the conditions of ASI credit unions weren't in perfect shape. One major ASI credit union in Nevada has been going through a long period of financial difficulties. As reported by the Credit Union Times in February, the "troubled Silver State Schools Credit Union of Las Vegas, the state’s largest, has received a financial bailout–said to be $22 million–from American Share Insurance." Conditions have improved at Silver State Schools Credit Union, but they're not out of the woods yet. According to a recent Credit Union Times article:
The long-ailing Silver State Schools Credit Union of Las Vegas said Tuesday it is witnessing “a sharp improvement in earnings,” having trimmed its nine-month loss to $17 million, a 58% gain over the $40.9 million a year ago.
So far the ASI appears to have avoided failures of any of their large members including Silver State Schools. As I described in this post, there have been opinions that private deposit insurers have trouble when one of their large insured institutions fails. The only ASI credit union to close in the last year that I am aware of was Cumorah Credit Union. As I reported in October 2009, the ASI was able to arrange for another one of its members to take over Cumorah Credit Union. In terms of size, Cumorah Credit Union had $147 million in assets and served 15,000 members. As a comparison, Silver State Schools reported in April that it has assets of almost $820 million and membership of over 78,000 at the end of 2009.
In short, ASI has held up so far. I'll leave it up to you to make your own decision about ASI's safety.
CD Rates at Christian Community Credit Union
One reason I wanted to review the issue of ASI is that I came across an ASI-only credit union that's offering some very competitive CD rates. If you are a long-time reader, you probably remember this credit union. It's Chistian Community Credit Union. It has been almost two years since my last post.
Christian Community Credit Union is still offering competitive rates on its Kingdom Builder Certificates. Minimum deposit is $1,000, and the maximum is $250,000. The money must be new to the credit union. The rates include a 1.80% APY for terms of 12 to 24 months and a 2.80% APY for terms of 4-year CD. The credit union's long-term regular and IRA certificate rates are also competitive, and they have a step-up option that allows a one-time increase in the rate during the term. The best rate is a 2.90% APY on a 5-year CD with a $100K minimum deposit. These rates are listed in the credit union's Kingdom Builder Certificates page as of 11/15/2010.
These rates are not that much higher than rates you can get at NCUA-insured credit unions. For example, some of the best CD rates are at Melrose Credit Union. As of 11/15/2010, Melrose is offering a 1.51% APY 1-year CD, a 2.52% APY 4-year CD and a 3.03% APY 5-year CD.
Another interesting aspect of Christian Community Credit Union is that it's on my list of the strangest credit union eligibility requirements. According to Christian Community's membership page, membership is open to individuals, within the Christian Community, who affirm its Statement of Faith.
The credit union has offices in San Dimas and Covina, California.
One thing that has changed at Christian Community Credit Union is its Bankrate rating. It was 3 stars (average) in early 2009. Now it's 2 stars (below peer group) based on June 2010 data. Note, since it's not federally insured, we don't have an overview of its financials at DepositAccounts.com.
Like the NCUA, the ASI does provide access to each credit union's financial data. Here's the ASI page for Christian Community Credit Union.
For more details about Christian Community Credit Union and its application process, please refer to my 2009 review.
I was not aware that if an institution was not federally insured you do not do overviews of them. It is very comforting to know this. I have always called or went to the bank or credit unions site to make sure they were federally insured. Thank you for posting this.
Since last year's article on this I have been movig my maturing CD's out of San Francisco Fire CU , which is insured by ASI. I called one time about this talked to their risk officer and he tried to assure me they were in good shape. Thy are but if Silver State goes down, SF fire might have issues. Needless to say most of my cd's will be out of there by Dec. 30 and headed to my CD reseervation at NCUA insured Pentagon Fed.
Thanks again Ken
As an aside, might I add that (with major help from Ken's blog) I will be earning more on my ladder well into the next decade (no joke) than if I had bought a ladder of tens. Given the fact that tens will no doubt tank as interest rates increase (along with bond funds), my ladder will keep out-performing.
Allan Roth (of Irrational Investor) take note. It's all about laddering, especially in retirement IRAs. Move money once a year from stock/bond (index) funds to a long (7 year, 10 if you can) IRA CD, custodian-to-custodian transfer (no taxes). Use Moneychimp to calculate what to harvest each year. In effect, you "dollar-cost-average" in reverse once you hit retirement, using this system to adjust your asset allocation to reflect your age, while buffering your bond portfolio (which itself should be a buffer) from losses due to higher rates.
Just my $.02 (actually, not too shabby a yield on a buck these days)
Just look at the Fort Meade Community CU special
Special CD Rate: 30-month term, $10,000 minimum, 3.55% APY (limited time only)
But ASI insured