COLUMBUS, Ohio — A falling interest rate environment and competition for liquidity sources have resulted in a run on CDs and a surge in business for certificate programs that cater to credit unions.
Primary Financial Co.'s SimpliCD business has quadrupled this year, and Atlanta-based QuickRate, a certificate marketplace subscription service with nearly 700 credit union clients, said transaction volume has risen 25% in the past year.
"There are many factors that affect the attractiveness of CDs, and a falling interest rate environment tends to be one that favors, from an investment side, a favorable CD environment," said Primary Financial President/CEO Mark Solomon. "With the Fed cutting rates for more than a year, the CD market has become an attractive one."
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Relative to both Treasury and agency securities, income from CDs is favorable, Solomon said, ranging from 60 to 80 basis points over agencies for comparable terms and more than 150 basis points over Treasury bonds.
"It's pretty clear there's value in CDs for credit unions," Solomon said.
The liquidity crunch has made QuickRate's online marketplace a popular spot this fall, attracting deposit-hungry banks, as well as deposit-heavy credit unions looking for good deals.
"Regulators have cut off some sources available to banks, particularly brokerage funds," said QuickRate President Shawn O'Brien. "It's taken a good environment for credit union investors and made it better because banks are really seeking direct investors."
QuickRate clients log onto the company's online certificate marketplace, where institutions list rates and terms for perspective buyers. In addition to providing a forum for CD sales, QuickRate also facilitates the purchase online and provides research and automated reporting services.
Loreen Ervin, manager/CEO of $16.5 million Laneco Federal Credit Union in Eugene, Ore., has been a QuickRate client for years. Despite membership in both Western Corporate FCU and Southwest Corporate FCU, Ervin said she purchases all of her CDs online through QuickRate.
"On average, I'm doing two to three investments per week, and I don't have time to research, one by one, all the places I can put that money," Ervin said. "Now, on days I need to make an investment, I can just sit at my desk, or log-in remotely from home, and select from the top 100 rates from institutions looking for funds."
Ervin confirmed O'Brien's claim that QuickRate CDs average 30 to 40 basis points better than SimpliCD products or other corporate CDs. She said she also prefers QuickRate's flat subscription rate and easy roll-over process.
Primary Financial is a CUSO owned by all 26 corporates and administrates the SimpliCD program. Corporates offer SimpliCD to members as an investment option and, using on-site representatives, not only shop around to find the best rates but also manage CD portfolios for busy credit union investment managers. That includes collecting interest and renewing or closing out certificates at term-end.
"The thing that we offer is end-to-end service," Solomon said. "Not to get trite, but our slogan, 'we do the work, you get the glory,' really is true."
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