At the beginning of 2006, Stanford FCU ($772M in Palo Alto, CA) assumed share growth would come primarily from certificates. The credit union targets 10% growth annually. Their priority is organic growth by focusing on doing more business with existing members. At year-end the credit union experienced 18% share growth built upon an 83% gain in certificates. This is how they got there.
Understanding the Membership
Like many credit unions, Stanford FCU has a small percentage of depositors who are critical to the success of any product or campaign. The credit union’s experience with their members suggested that liquidity was a critical feature and few would want to tie up savings beyond one year. Historically the credit union had achieved a renewal rate of more than 80% for certificates. This data helped management tailor a product that would match the credit union’s balance sheet with the needs of members.
The 7-month Liquid CD
Stanford created a 7-month Liquid CD for members’ new deposits over $10,000. The innovative feature was a one-time “call option” that permitted savers to redeem money at any time; however, they could not add to the initial balance. The account paid an APY of 4.594%, lower than the credit union’s one-year CD, but the same rate as the highest tier money market account. Because of the call feature, the rate was lower than other CD’s offered in the market.
This callable CD brought in $129 million in new deposits for the credit union—an amount equal to more than 15% of the credit union’s assets. Only $3 million was redeemed early and more than 90% of members have renewed the CD at maturity. The average balance in the account is $43,000. About 3,000 members, or 7% of the membership, now hold this new product. With the 90% renewal rate, the credit union is able to use a portion of these funds for longer term loans to help sustain the net interest margin.
Success factors for the program include:
Combining a liquidity option with the earning power of a CD had real member appeal.
The requirement for new money limited internal rollovers and the re-pricing of existing funds.
The member’s value of a one-time call option, even for a certificate with a term of only seven months, helped Stanford FCU compete in the CD market without being a rate leader.
Renewals are critical to the program’s long term success and building ongoing relationships versus hot money transactions.
Products tailored to specific member needs show that there are still good opportunities for internal or organic share growth strategies—even in a slow growth market.
While many credit unions are finding success in share certificate growth, others are pursuing innovative strategies to achieve results in regular share, money market and share draft accounts. Join us on the Share Growth Strategies in Lean Market, a webinar brought to you by Callahan and Associates and featuring BECU’s Member Advantage & Early Saver Program which has contributed to 17.2% share growth.