Magazine article American Banker

55% Surge Makes CDs More Than One-Fifth of Credit Union Deposits

Magazine article American Banker

55% Surge Makes CDs More Than One-Fifth of Credit Union Deposits

Article excerpt

CD-style deposits skyrocketed last year at the nation's credit unions -a sign of the industry's aggressive attempt to keep and build its membership.

Yearend deposits in share certificates - the credit union version of certificates of deposit - totaled $57.8 billion, according to the National Credit Union Administration. That's 54.8% more than at yearend 1994 and constitutes more than a fifth of all credit union deposits.

"If you increase rates, they will come," said Joseph W. Veneziani, chief executive of Group Health Credit Union, a $140 million-asset Seattle association. Group Health was sixth in the nation last year in terms of percentage increase in the product - 444%, to $24.7 million.

Mr. Veneziani said his institution focused its efforts more in this area -in part by lowering the minimum deposit threshold from $5,000 to $1,000 -primarily to provide an alternative to the growing appeal of mutual fund companies, which routinely tout rates of return on equity funds several times higher than that of credit unions.

Though they can't compete with those companies, credit unions can offer attractive rates, up to around 7% on one-year certificates, and stress that they're federally insured, unlike the mutual fund companies, Mr. Veneziani said. The 7% rate easily tops the roughly 5% yield offered by money-market mutual funds.

Savings as a whole at Group Health did not increase much last year, but the certificates likely prevented a deposit drain, Mr. Veneziani said.

Most credit unions have been offering the certificates for some time but have attempted to expand their use in recent years, particularly last year, to protect their turf against incursions not only from outside the industry but from inside as well.

Members of many credit unions are eligible for membership in other associations, so credit unions have to match or beat the rates of neighboring institutions, credit union chiefs said. …

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