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Additional deposits capacity
November 22, 2016
7:11 pm
Norman1
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Loonie wrote

What do you think of the financials, Norman? Do you think this CU can handle a significant influx of money well at this rate of return, or are they taking too much risk? Or do they not give us enough info to go on? I realize there is the insurance, but still wouldn't want all eggs in one basket due to inevitable delays if things went very wrong.

That depends on how big the influx is.

According to their 2015 annual report, Carpathia Credit Union had about $405 million of deposits at the end of September 2015.

They had net income of $1.94 million for the fiscal year ending September 2015.

If the new Ideal Savings account deposits could not be loaned out or invested at all, that $1.94 million would be enough to cover the 2½% per annum interest paid on $77.6 million of new deposits.

I'm sure they would be able to park any extra money in one-month bankers' acceptances. Those are currently yielding 0.8% per annum. So, the net cost would be 1.7%. The $1.94 million would then be enough to cover the net cost of about $114 million of excess new deposits.

November 22, 2016
10:23 pm
Loonie
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Thanks for your thoughtful analysis, Norman.

December 11, 2016
8:05 pm
Loonie
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Given how Ideal has proceeded so far, with lowering their so-called "guaranteed" rate after 10 days, I don't think we need to fear for their viability. If they get anywhere near their lim in deposits, they'll just change the rules.

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