Friday, March 16, 2012

Low Rates on Deposits

Most credit union members are aware that deposit rates have remained low for some time now. The Federal Reserve overnight target rate has been 0.00% to 0.25% for an extended period of time and is not expected to change until 2014. Investment options available to the credit union on our investments remain low, especially given the fact that the credit union's investment portfolio remains conservative for the safety of our membership.

North Alabama Educators Credit Union saw an increase in total assets during 2011 of roughly 7.00% which was the outcome of members bringing their deposits to the credit union. The flip side of our balance sheet is loans and investments. Loans to members saw a decrease of roughly 2.00% during 2011 which can be attributed to a weakened economy and reduced loan demand throughout the industry. Ideally, a credit union wants to maintain a fairly matched level of new deposits and new loans. The investment market remains low as stated earlier so loans to members is the preferred usage of money that comes into the credit union from deposits.

What does this mean to our credit union members? Unfortunately it is a good time for borrowers but a bad time for savers. Our loan rates are already low and will be dropping further on various loan programs. Our deposit rates on regular shares, super shares, certificates, and IRA's are lower than other financial institutions for the time being. We would encourage our members to compare available offerings on certificates maturing with North Alabama Educators Credit Union. We want our members to earn the most that they can on their hard earned dollars.

As the economy and loan demand improves over time we fully expect to offer more competitive rates on our deposit accounts. The credit union is a financial cooperative so deposits and loans go hand in hand. Longer term members might remember an old credit union phrase of "nobody borrows until somebody saves". These days the opposite is true as credit unions are seeing an influx of deposits combined with the flat or negative growth in loans. This current trend will change over time as economic cycles always do.

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