COTTONWOOD, Idaho-A strong loan-to-deposit ratio, a frugal approach to expenditures and a close connection with the community's needs has propelled Cottonwood Community Federal Credit Union to the top of Callahan & Associates' Return of the Member rankings. The company slotted the $52-million institution first in the return of the saver segment for credit unions of comparable size.
Cottonwood Community FCU has served the area, which relies heavily on the timber and agricultural industries, for 66 years, noted CEO Gregory Sonnon. That position in northwest Idaho has enabled the institution to boast that more than 20% of the people living in its charter areas are members. "We don't have a whole lot of programs, we have the standard package and we try to do that well," he said. "We compete directly with three other credit unions in the area, as well as US Bank, Wells Fargo and Sterling."
Though Lewis and Idaho counties, Cottonwood Community's charter area, boast a combined population of about 18,000, larger banks still make a play because of the high-value loans for land and equipment demanded by the agricultural and timber businesses that dominate the economy.
Strong savings rates, fair lending terms, as well as a lack of fees on loans, combine with the long-standing relationship Cottonwood Community FCU has built with its 3,800 members to yield a loan to share ratio near of over 98%. The credit union offers a 1.75% yield savings account with a $5 minimum balance and a 5.09% 60-month CD that carries a minimum of only $500. But the most popular deposit product, "by far," Sonnon said, is the one-year certificate that pays 4% interest.
Compared to the competition the CEO said Cottonwood Community FCU's rates are typically "at the top end-not always-but we try to return what we make to our members."
Sonnon pointed to penny pinching from the top down as the chief reason it is able to give back to the membership and why it earned the highest position on Callahans' rankings.
"Our board is very frugal," he said. "We try to keep our operating expenses at 2% of our assets, and most credit unions our size are at 3% to 4%."
Sonnon expects the unexpected when it comes to savings rates in the future with the Federal Reserve targeting interest rates near zero for the time being. At the same time, companies like Morgan Stanley, Goldman Sachs and GMAC kicked off the race to become a bank holding company and thus be eligible for TARP funds. That action could be beneficial for savers as there "might be increased demand for deposits which would keep the rates up for our savers," Sonnon mused. "The more competition there is for deposits the better rates they are going to get."
