Sept. 18, 2006


  • This article touches on a very key point -- what are the "intangibles" of organic funding versus wholesale. How do we quantify -- extremely important point the article raises
  • Great article. I pursued this type of strategy successfuly for years at my old credit union, much to the chagrin of the CFO, who just did not understand the value. Marketing took many hits on using tactics like this to acheive historically strong deposit and member growth while maintaining an ROA well over 1.0%.
  • Throwing out a high rate to the public is the easy way out. Credit unions need to be more inovative in drawing in a member with lower cost of funds. Relationship pricing strategies, SEG penetration, financial services and business banking seem to be more difficult yet more cost effective in the long run. B of A just announced free on-line trading today.
  • Our credit union has followed a similar strategy with great success and it has been embraced by our CFO. She understands the value of attracting targeted new members with this type of offer and using it as a starting point to develop deeper relationships with members you may not have had any contact with otherwise. Of course, you could always take the unimaginative and easy way out of just borrowing money from the marketplace, but that develops NO new member relationships.
  • We have used this short term, premium priced CD special with a maximum limit of $1,000 in conjunction with opening a branch in a new market area. The CD special was only available at the new branch. While some of our existing members traveled to the new branch, the promotion also resulted in a significant number of new members and great exposure for our new branch, our services, and our superior member service. We have had such CDs opened for sons and daughters due to the limited amount. We only allow one of these CDs per member. We also have a Member Loyalty Rewards program designed to encourage members to utilize at least 3 different services and based on the aggregate total of shares and loans to qualify for the various tiers. We have also been successful in increasing the average number of services per member through an aggressive cross selling program in our front line areas.
  • Three problems with this approach in my experience: 1. Demographics of CDs are getting older and older. This will be an increasignly diminishing pool of money as time goes by. Has your son or daughter opened a CD on their own? 2. Rate specials bring out rate chasers. You'll have to have an equally high special when that CD matures, so they'll go elsewhere or you'll still be overpaying. 3. What are you going to lend 8% money out at in this rate environment?