CFO: Peg Lamb
Credit Union: Capital Community CU
Market: Lansing, Mich.
Assets: $200 million
"Banks can't borrow from each other, so they're borrowing from their customers, and it's just killing us," Lamb said. "I've got my latest ALCO packet here, and we use something called Rate Watch that lets us know what rates are doing in our area. Usually there's a page just on the specials, and usually it's not even a full page. This time, there are four pages of specials."
One competitor in Capital Community's market is paying premium rates on products with minimums from $1,000 to $500,000. "That's very rare, they usually focus on one specific product," she noted.
The obvious dilemma for credit unions in markets with pricing wars is the extreme pressure on earnings. "If you are having to scrimp and save or every penny, it's hard to match what the banks are offering."
Capital Community's current strategy: price its standard certificates as low as it can, but offer one special CD to rate-conscious shoppers. "We are seeing a lot of our CD funds leave," said Lamb. "That has not been a huge detriment for us, because we could afford to lose some of that."
The big question is how long can it afford to watch an outflow. "It seems to be flattening out as Fed rates come down. As others are bringing theirs down, we can keep our rates where we had them. But if this continues, we'll eventually have to raise them."
Capital Community is currently offering a special 10-month CD at 3.15% APY, but is up against a nearby CU paying 4.30% APY on an 11-month term, and a local bank dangling a 25-month CD at 4.50%, a 36-month CD at 5.05% APY, and a 60-month CD at 5.20% APY. "Really, at this point, we are just looking to meet our core member's needs. We're not even talking about growth," Lamb related.
Since CCCU doesn't have a lot of flexibility in its pricing, "We have really scrutinized every expense, and we have managed to save a boat load of money. It takes a while to see the fruits of that labor, but it is amazing how much you can save," Lamb offered. "The fact is it's a good way to run a credit union. It's the same thing we're telling our members to do."
Capital Community has also taken a hard look at its fee structure. The goal: raise nuisance fees without raising the types of fees that every member pays.
