Credit Unions Pivot In Response To Rising Rates (Part 1)

Credit unions balance agility and liquidity as they raise rates on what they pay and what they lend while keeping an eye on members’ financial welfare.

Interest rates just keep rising as the Federal Reserve announces one sharp hike after another in its war on inflation. Meanwhile, those rising rates contribte to the pinch borrowers feel as they strive to keep pace with consumer prices whose increases are largely outpacing consumer paychecks.

Credit unions are responding, each in their own way, boosting what they pay in deposits and trying to keep loans affordable. Here’s how some are contending with the ennvironment as they move into a holiday season that could see inflation turn into recession, as is now widely expected.

This is the first of a two-part series. Read on to hear from Dort Financial Credit Union, One Nevada Credit Union, Element Federal Credit Union, and Together Credit Union. Part two features Advia Credit Union, Community Financial Credit Union, Capital Credit Union, and CommunityAmerica Credit Union.

Keeping An Eye On Liquidity

Brian Waldron, President & CEO, Dort Financial Credit Union

Brian Waldron joined Dort Financial Credit Union ($1.4B, Grand Blanc, MI) in March as its new president and CEO. The Flint-area cooperative has 11 branches and approximately 103,600 members.

How has Dort Financial changed deposit strategies in response to rising interest rates?

Brian Waldron: We’re looking at our rate strategy every day. Like many institutions, liquidity has become an issue. We diligently review CD maturity dates versus loan projections, etc. How do we hold on to the certificate dollars and bring in more deposits? Of course, there are both long-term and short-term repercussions we must be cognizant of.

How has inflation affected savings volume at your credit union? Are members in a better position or worse heading into this holiday season?

BW: We’re seeing members in both situations. All members are suffering due to record inflation. Many have been forced to use their savings. Others have been able to weather inflation but are unable to save additional money consistently.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

BW: We’re still seeing incredible lending demand even with rising rates. We’ve raised rates on many loan products and demand remains high.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

BW: We’re discussing internally how we can best help members through the holidays, whether it’s a loan special or skip-a-pay on loans or both.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

BW: We’re focused on educating members on real estate lending and the historical perspective of interest rates. We also work with a third-party vendor to offer resources for our members to pay off debt, budget better, etc. A number of our team are certified financial counselors and use that training as they work with members.

‘It Sucks For Everyone’

Linda Bodie, Chief + Innovator, Element FCU

Linda Bodie has helmed Element FCU ($47.1M, Charleston, WV) since 1998. Her cooperative now has three branches and approximately 4,400 members.

How has Element FCU changed deposit strategies in response to rising interest rates?

Linda Bodie: Our overall deposit strategy is to remain super competitive. In this rapidly rising rate environment, it’s been challenging to keep our rates and products fresh. What was once a weekly review is now a daily review. We review as often as needed and make changes whenever they are needed.

How has inflation affected savings volume at your credit union?

LB: Our savings volume has increased slightly. We’re seeing more interest in longer-term investments, like CDs, because these rates are finally attractive.

Inflation seems to be a mixed bag. Some members are struggling while others are navigating this time without too much heartache. We’ve seen wage increases and other creative pay solutions help our members with the increased costs. Bottom line though? It sucks for everyone.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

LB: Surprisingly, we’re lending more now than we have in the past few years. We’re seeing mostly new and used autos and home equity lines of credit boosting our numbers. We’ve kept our lending rates as low as possible but have adjusted them as rates continue to change so quickly. It’s definitely an interesting time to price our products.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

LB: We offer special holiday loans every year. These are small-dollar, lower-interest rate loans that allow for holiday spending with a defined payoff date. This helps the member pay off debt in a timely manner and keeps them from longer-term loans and lines of credit that seem to never pay off.

We also offer our Own Your Future credit builder loan. It’s a product that allows a member to build credit while they save for their future. Our lenders work closely with participants to ensure they stay on track. We also give them access to their credit score and education through SavvyMoney.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

LB: We educate members one-on-one and in group events. We also provide a wealth of free financial tools for them to use on their own. If we can find tools that help, we share. Anyone who wants help gets it.

Leveling Off

Tom Ernsperger, EVP & CLO, One Nevada Credit Union

Tom Ernsperger has been with the 15-branch, 76,000-member One Nevada Credit Union ($1.4B, Las Vegas, NV) since 1999. He’s been the executive vice president and chief lending officer since May 2019. His president and CEO, Paul Parrish, contributed to these responses.

How has One Nevada changed deposit strategies in response to rising interest rates?

Tom Ernsperger: With a liquidity ratio of about 45%, we continue to lag a bit on deposit pricing, despite current market trends. We need to balance that with member benefit, so some dividend increases are in the works. We’re also being a bit more aggressive with referring some of our higher-deposit members over to our registered investment reps.

How has inflation affected savings volume at your credit union?

TE: After a couple of years of double-digit share growth, we’ve now seen a bit of leveling off. We attribute some of that to inflation as well as the effects of the stimulus starting to wane.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

TE: We’ve seen continued strong demand for auto loans and a substantial decline in demand for mortgage loans. We’ve raised rates in both areas, pretty much in concert with market trends.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

TE: During the holiday season we offer a skip-a-pay option through our credit card provider. After the holidays, we normally go out with a balance transfer offer to help folks lower their monthly burden.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

TE: We haven’t made any specific changes in this area. We encourage members to spend wisely, borrow smartly, plan thoughtfully, and save diligently.

Focused On Checking

Kory Kunze, VP/Remote Services & Payments, Together Credit Union

Kory Kunze has been with Together Credit Union ($2.4B, St. Louis, MO) for approximately five years. For the past two years he has served as vice president for remote services and payments. The St. Louis-based cooperative has 27 branches and approximately 138,400 members.

How has Together Credit Union changed deposit strategies in response to rising interest rates?

Kory Kunze: First, we’re still focusing on driving checking growth. It isn’t impacted by interest rates and it increases member engagement — members with our checking tend to grow into deeper relationships.

Second, we’re doubling down on digital and personal experience. Although we need to be competitive from a rate standpoint, we need to give members a reason to want to interact with us.

We’re also looking at creative ways to position some of our common products — like money markets and CDs — so they stand out in the market, through pricing and special terms.

How has inflation affected savings volume at your credit union?

KK: I think members are starting to see the impact of inflation. It’s more difficult for them to hold shorter-term savings.

We encourage our members to take advantage of our Achieve It Checking, which allows them to pay themselves first. We round up transactions into their savings, and we match it up to a certain amount. Short-term savings was a problem before recent inflation, it will only get worse after.

How have rising interest rates affected consumer lending volume at your credit union? How have you changed your rates and products?

KK: We’ve made some rate adjustments, but we still commit to being in the top tier competitively in our market. Volume is still good, but we’re seeing some change in purchase and refinancing behavior, whether slowing down on auto or home purchases and refinancing.

Putting debt on credit cards is more expensive than ever — are you offering special loans or deals for this holiday season?

KK: We’re usually pretty competitive on debt consolidation loans, so we might highlight these. However, the biggest impact we’re making is by keeping our credit card rates significantly below market.

How are you educating members about interest rates, paying off debt, budgeting spending, and better saving habits as we head into the holiday season?

KK: We have some avenues to proactively reach out to members. Our investment advisors not only talk about investments but also help members where they’re at, whether it’s investing or trying to get out of debt and save. Our financial literacy app, Zogo, provides an interactive way to learn about managing financial wellness and rewards users with gift cards for engaging. Our GreenPath resource helps struggling members budget and create plans to reduce debt and save.

Interviews have been edited and condensed.

 

November 21, 2022

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