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I recently attended a pretty good ALM conference held by Brick and Associates which several of our credit unions attended as well. I thought I would pass on a couple of thoughts from the meeting that I felt were noteworthy.
Economic Forecast: This group watches the economy closely and they walked us through all the key indicators. Their summary is that they do not see any reason for the Fed to raise rates in the near term and that they will continue to be an inverted or at least flat yield curve for at least some time.
Mortgage Rates: Those credit unions doing 1st mortgages must make sure that they are watching market rates closely and that they change rates accordingly, particularly when they are rising. With the long term nature of mortgage loans, too many credit unions are slow to make rate changes and get locked in with unnecessary low rates for a long term damaging yield and your ability to reprice those loans as the market changes.
Mortgage Industry: The mortgage industry is starting to really struggle nationally. Competition has been very fierce, causing many to lend to
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those with lower credit scores. Sub prime lenders are now starting to struggle and fold causing a lot of loses in the industry. The Housing industry has slowed dramatically on the national level so this will continue to be a competitive market.
HELOC's: Variable Rate Home Equity Loans are the best ALM tool you can have. The best ones index monthly and are not capped. They provide you protection against a rising rate environment.
Credit Card Rates: They suggested that card rates should be in range of 11.9% to 12.9% at least for your higher rate tier. This is par for the industry, so don't leave money on the table by undercharging.
Favorite Saying: "Don't assume the competition knows what they are doing. " Unless they are much smarter or have a crystal ball that you don't have, they may not know any more than you do about the economy and rates. So don't follow the competition just because they are doing it. Make your own strategies based on your ALM needs and do promotions because they are part of your plan.
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