Account Is Generating High Interest
BATON ROUGE, La. — Pelican State CU has one of the strongest brands of any credit union in the country, according to Bancography, and the CU credits much of that name recognition to its high-interest checking account.
The Bancography Brand Value Index ranks Pelican 16th on its 2010 list of the top 25 CUs (under $1 billion) with the strongest brands, basing its selections on reputation, service quality, image, and market awareness. Pelican has locations along the southeast coast, but CEO Jeffrey Conrad said what's spreading the word are deposit rate shoppers across the U.S.
"We have e-Xtra Bonus Checking, a rewards-type checking account that pays 5.01% (APY). I think about every retiree specialist website has listed our account. We have had people from Rhode Island to California finding ways to join our credit union," Conrad said.
e-Xtra Bonus Checking pays the high rate on balances up to $30,000. But members must take home banking, e-statements, have a recurring automated monthly deposit, and perform 15 debit transactions per month. Members who do not meet those requirements are paid .50%.
With deposit rates very low, many consumers are shopping for high-rate checking accounts, said Conrad, who said evidence of that has come from more than e-Xtra Bonus balances building by $22 million in the last 18 months. "So much of the attention has come from word of mouth, and people talking about us on the web. We've seen a lot of students chatting about e-Xtra Bonus on the (Louisiana State University) chat room alone."
Many of the national CD search engines have categories for checking and Conrad said Pelican's account is listed on most.
Conrad said Pelican welcomes the attention, especially since e-Xtra Bonus Checking is a very profitable product. "Our cost of funds is well below the 5% rate we advertise, when you factor in the savings in statements and postage, the interchange income, and the fact members do not always meet the monthly requirements to get the higher rate."
The CEO added that the account's net cost of funds has been lower than its CD and IRA portfolio. "That's an important statistic when you consider that we have watched so many members over this past year move their money to e-Xtra Bonus as their CDs matured," Conrad said.
PSCU's ALM team keeps a close eye on the checking account due to its aggressive growth. Conrad said e-Xtra Bonus Checking will likely be restructured this year. "We've looked at cutting the rate and we don't want to do that. We may lower the maximum deposit, possibly to $20,000. We want to slow the growth a little, to take care of members who have already moved their money to us. We don't want the account to continue to grow at its rapid pace and then hurt all members in the process."
Conrad said the entire formula behind Bancography's Brand Value Index, which it uses to rank credit unions, is not clear. But the CEO understands Bancography takes into account the financial institution's ability to perform given its local market conditions. Louisiana is one of the most economically distressed regions in the country. "We are performing well," said Conrad, noting capital is above 9% and ROA last year stood near 1% after assessments. "For the past three years we have given back more money to our members than our peers."