Feed The Need
The Beehive State is well known for the political rancor between credit unions and banks, but according to deposit rate data from DataTrac, it is also one the most competitive areas of the country in terms of deposit rates. The Credit Union Journal talked with David Kwant, chief financial officer of Mountain America FCU, about competing in this contentious marketplace.
CUJ: Are you feeling pressure to raise deposit rates?
Kwant: We try to pay rates based upon our need for money. If people are fleeing the stock market for safety, we don't have to pay high rates. Right now, rates are going up and you don't want to drag your feet too much on raising rates, because if rates go back down, there's no place to cut.
CUJ: How do your rates compare to your competition?
Kwant: We feel we are very competitive.
CUJ: In addition to the Fed and your competition, what other factors do you consider in establishing your pricing?
Kwant: Our need for money. If we have a surplus of money we might price rates at or slightly below the competition. Our savings come in the first six months of the year; loans grow faster in the second six months of the year. So, we try to bring in money in the first six months of the year.
CUJ: What sort of asset-liability management tools are you using, and what are they telling you about your deposit interest rates?
Kwant: The Brick model from Brick and Associates. Plus we get a quarterly report from WesCorp: the QRM model.
CUJ: What is your ALM program telling you?
Kwant: Our ALM program is telling us our non-maturing deposits are a help to us. As I said earlier, if you don't raise your savings rate, you end up hurting yourself later if rates drop.
CUJ: What rates are moving fastest?
Kwant: There's always a battle with that. I always want to raise loan rates as soon as rates go up, but our loan people say we won't be competitive. So, it's almost a tie. Again, it depends on if money is flowing in or out.
CUJ: Which deposit product rates are moving fastest?
Kwant: Our certificate rates move the fastest because they are more rate-sensitive. Second is the money market account, then shares, then checking. The checking rate isn't rate-sensitive at all.
CUJ: Where do you expect rates to go from here?
Kwant: They'll go up and they'll go down. When and how much, nobody knows. If you ask 10 economists, you'll probably get 12 answers on that. WesCorp thinks rates are flattening and will go down later in the year. I don't think there will be a big spike: I think they will be flat or slightly up.