CFO: Dan Leclerc
Credit Union: Lacamas Community CU
Market: Camas, Wash.
Assets: $162 million
"We have been seeing rates going up on CDs, both at banks and credit unions," Leclerc said. "Washington Mutual had a great presence here, and when they came out with specials and features prior to the buy out [by JP Morgan Chase], we saw credit unions offering specials as well. That really puts pressure on us to try to keep the money here."
The big issues, he said, aren't merely the costs to borrow those funds, but the rate sensitivity of LCCU's membership.
"We average about a 75% roll-over rate. I've been tracking that for two years, and while some of that money does go outside the credit union, some of it stays right here in their checking accounts," Leclerc explained. "And we still have new money coming in, so as we look at some of the high rates being offered out there we have to ask ourselves, does it make sense to offer that rate?"
Leclerc said he was seeing deposit rates he called "ridiculously high" all the way up to 4%. "I can only assume that these banks are pretty good at modeling out to 12 months and are able to say it's worth it to do this today," he offered. "As for credit unions, they're raising CD rates because they need the liquidity, particularly those that are 100% or more loaned out. Borrowing has become more expensive, so it's cheaper to get it from CDs."
But even before the credit squeeze, Lacamas was in the process of changing its CD pricing strategy. The original idea: keep the standard CDs top of market and don't bother with specials, turning Lacamas CU CDs into a no-brainer for members. "We're a credit union, so let's make it so members don't even have to think about rate, so they don't even need to shop, they can just stay with us and know they're getting a good deal," Leclerc said. It's a strategy in keeping with CU philosophy, "but the market wants specials. There's the psychological factor of getting a better deal."
So the credit union has changed course. "Our standard products are priced kind of middle of the road, then we have 'Featured CDs' and we base those on what we need," he related. "We keep the standards middle of the road so we don't make those members who are not rate sensitive become more sensitive."
As LCCU continues to rework its strategy, it is finding that pricing isn't the only thing that's changing. "We used to always talk about what was best for the member, so if a member came in we were always immediately telling that member what was the best deal for him," Leclerc said. "Now, instead of thinking about what's best for the member, we're thinking in terms of what's best for the member-ship. It's an interesting shift. But it allows to look at what members really want. Do they want a great rate, the best rate in town, or do they want more robust online banking?
