San Antonio Credit Union Offers Hybrid CD-Money Market Account

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Everything's bigger in Texas, including, in some cases, deposit rates. Data provided by DataTrac indicated the San Antonio market is one of the most competitive deposit rate markets in the country, so The Credit Union Journal talked with John Worthington, senior vice president of corporate communications at Security Service FCU, here to see how the nation's 10th largest credit union is dealing with deposit rate competition.

CUJ: Are you feeling pressure to raise deposit interest rates?

Worthington: Obviously, the Fed actions to raise rates does have an impact on our products that are rate-sensitive, such as CDs; not so much savings or checking.

CUJ: How do your rates compare to your competition?

Worthington: It is a competitive marketplace, and we feel we are able to stay competitive by offering our members products that are beneficial to them while still meeting our requirements.

CUJ: What strategies do you use in setting rates? In addition to the Fed and your competition, what other factors do you consider?

Worthington: Funding and liquidity needs impact our rates. Our products primarily are market-driven. We try to maintain a set of products that will help our members with their financial needs, but there are only so many types of deposit products.

CUJ: What sort of asset liability management tools are you using, and what are they telling you about your deposit interest rates?

Worthington: We have an asset liability model we use. We have a variety of things we can use in that model to help manage our exposure to interest rates. We are following the model and it is telling us we are doing the right thing. There's a variety of ways to maintain balance between assets and liabilities.

CUJ: What rates at your institution move faster: deposits or loans, and why?

Worthington: Deposits, always, because they reprice faster. You get a fixed loan: mortgage or even a car loan, that's not going to change once it is set. But if the Fed raises rates, we are going to have to reprice.

CUJ: Of your deposit products, which rates move faster and why?

Worthington: Those things that are market-driven: CDs, money market. Checking and savings have not been very mobile for a while. That reflects the flat yield curve everybody has to deal with. We've created a product that is halfway between a CD and a money market: the "Future Builder." It provides long-term savings for our members. They can make a deposit every day if they want to. It is semi-liquid, and it provides a higher interest rate than a money market. It is a type of product designed to help our members.

CUJ: Where do you expect rates to go from here?

Worthington: Long term is pure speculation. In the short term, we are going to see a little more action from the Fed, then things will become more stable. Maybe another short-term rise or two from the Fed, but that's speculation. It is affected by outside events such as the price of oil and gasoline. Maybe we'll have another Katrina or Rita. We want to make sure we are flexible enough to offer a viable financial alternative to our members by having a full set of financial products and services.

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