What happened to our deposit rates?

One of the great things that I get to do here at the credit union is review all of our member survey comments. We survey members each month to see how we are doing and find out what’s on their mind. I appreciate that our Rogue Federal Credit Union members care enough about their credit union to give open and honest feedback. I get to hear stories about the great things our staff members have done and how much folks appreciate all that we do in the community. I also get to hear about when we’ve done something wrong or when we are not living up to our members’ expectations. Our branch managers and staff work very hard to directly answer every idea, observation, and concern that our members share.

A common theme that I am hearing today is concern about our deposit rates. Members want to know what happened to our deposit rates, why are they so low, and what can they do to get better rates? I also hear from our members that if we wouldn’t build these “fancy” new branches, and sponsor all these community groups we could pay them more on their deposits. Of course, I take all of these concerns to heart and figured it was time that I helped clear the air on “what happened to our deposit rates…”

First, our rates are actually quite competitive with other local institutions. In fact, we look at the rates of 9 local financial institutions every week. Our goal is to be better than most, so we are consistently in the top third of deposit rates in our market area. In fact, we have had the highest 3 year, 4 year, and 5 year certificate rates for several weeks. So, why have rates fallen so dramatically? It is a simple case of supply and demand with deposits being the supply and loans being the demand. In other words, as Americans become more conservative they borrow less and they save more. This means there is no demand for short-term deposits and deposit rates have fallen dramatically.

That is exactly what is happening at your credit union. Our deposits have grown $18.4 million and our loans have fallen $1.1 million year to date. Since there is limited loan demand (probably a good thing considering the economy) we must park our member deposit in short term investments. Most of these funds currently earn us just 0.25%. So, it’s clearly loan demand and the economy negatively impacting rates and not our new buildings and our community activities.

We know that there are a lot of large national institutions out there offering higher rates. These banks are trying to “buy” their money back since so many deposits have moved into secure organizations like your credit union. We encourage you to make the most of your money, and understand if you need to take advantage of better rates, but we also advise you to protect yourself and ensure that you are mindful of the federal deposit insurance options where you are parking your money.

With the challenging economy most folks are seeking safety and security and there is a cost for that safety and security. While I anticipate the day when rates at my credit union are higher (I am a depositor too) I can sleep easy knowing that my credit union is safe, sound ,secure, and watched over by a group of experienced professionals and dedicated volunteers. These volunteers are everyday folks that live and work in the Rogue Valley and volunteer their time to make sure that we make the decisions today to ensure the future of the credit union tomorrow. The great news is that rates will get better…. someday, but your credit union will be here forever!