CFO: Jose Garcia
Credit Union: Advance Financial FCU
Market: Schererville, Ind.
Assets: $140 million
What do you do when Harris, Chase and Citizen's banks are all on the same block as you, and each is bidding up deposit rates on a daily basis?
"There are two options. Either you watch your deposits walk out the door or you be competitive. We chose to be competitive," Garcia told Credit Union Journal. "The potential downside to trying to compete like this is a negative impact on earnings, and we are being very careful to monitor that."
One of the factors that has allowed Advance Financial to remain competitive is that it had about $7 million in CDs all maturing in November.
"The members are driving demand," he explained. "It's not just that the banks are pricing their CDs higher, it's that members have learned to rate shop."
The result: "competing" with the banks is as much a defensive move as it is about trying to bring in new members and new money. "I'd say net we retained the same level last month. We didn't grow, but we didn't shrink," Garcia offered.
Where once Garcia and his staff monitored rates month to month, for the staff now it's week to week, and for Garcia it's every day. "We have empowered our staff more than in the past to match deals," he added. "This market is an opportunity for credit unions, I think, to gain new members and not just deposits. When we bring in a new deposit, we're looking to see if they have any loans we can buy out, other products we can cross-sell."
To that end, Advance Financial has beefed up its marketing with more commercials on cable television, for example. "You have to have a proactive ALCO committee and realize there are some rates that just can't be beat. You have to monitor interest rate risk."
Regardless of how the economy changes, one resulting change isn't going away, said Garcia. "The economy is teaching people to shop rates. And the Internet allows them to shop rates quicker and easier than ever," he said. "This rate war could be a permanent way of doing business.
