Achieving a 90% Retention Rate with
Non-brokered Institutional CD Deposits
by Lorie O’Neill, Principal, Critical3 Marketing
A veteran of the banking industry since 1987 and Board member of the Financial Managers Society, Kevin Mullins is
intimately familiar with the challenges of maintaining viable and diverse sources of liquidity. He has decades of experience
serving as a CFO of community banks, and he appreciates first-hand the need to have a stable non-brokered liquidity
source that can be relied on for readily available funding – all at an attractive cost.
Non-brokered CDs – Essential for the Funding Mix
Researching various funding sources to fill his requirements for stability, availability, and flexibility, Mullins found just what he
was looking for in the QwickRate non-brokered CD marketplace. That was in 1999. Since that time, Mullins has considered
QwickRate to be an important component in a well-diversified funding mix. Banks and institutional investors make direct
connections for funding and investing through QwickRate. It is the only Internet-based deposit source selected by the ICBA
as a Preferred Service Provider, and it offers a cost-effective way for banks to add and proactively manage direct deposits.
In fact, Mullins says that QwickRate is a valuable liquidity management tool that every bank can use with great success, and
a vital source of contingency funding.
Controlling What Comes In and When – Proactive Funding Management at its Best
Back in the late 1990s, Mullins was first struck by the remarkable degree of price control offered in the QwickRate
marketplace. There is a very strong correlation between where a bank positions its CD rate in QwickRate and how much
money the bank is able to attract in a specific period of time. Mullins likens the process to turning on a water faucet: the flow
can be trickling or wide open or anywhere in between.
A bank can direct not only the pace, but also the price, of incoming deposits by moving its CD rates up or down. Automated
QwickTools™ provided by the marketplace will help the bank determine the best position for its purposes. In addition, the
bank can proactively manage outflow by laddering its CD terms and controlling whether to offer renewals on certain CDs.
Mullins advises banks to keep an appropriate rate posted in the marketplace at all times. This practice helps to build name
recognition among QwickRate investors. As it turns out, they are a loyal and long-term source of deposits, as Mullins’
retention rate analysis confirms.
Retention Rates as High as 97% – It Can Easily Be Done
Institutional CD investors in the QwickRate marketplace are loyal and steadfast, maybe even more so than many local
customers with multiple accounts at a bank. This fact has been validated by the high retention rates Mullins has seen
tracked over the years relative to CD placements in QwickRate. Retention rates above 90% are not uncommon. One bank
realized a rate of 97%, with some CDs established 11 years ago having been renewed 15 times – and counting. Mullins
views this long-term loyalty among QwickRate investors as the norm, rather than the exception. The marketplace automates
renewals with its eRollover tool, which eases administrative burdens for both issuers and depositors.
www.qwickrate.com
800.285.8626
Achieving a 90% Retention Rate with Non-brokered Institutional CD Deposits
Always Available – Jumbo CD Deposits for Longer Terms
Only pre-qualified institutions are allowed to participate in QwickRate; individuals are not permitted to become subscribers.
The institutional investors in QwickRate typically place deposits up to the insured amount. Therefore, CDs generated through
QwickRate are often much larger than those booked through a community bank’s branch operations. What’s more, the
deposits placed in QwickRate are, in Mullins’ experience, for longer terms than local investors are willing to consider.
Why is this important? Say a community bank needs to lengthen the maturity of its deposits due to a liquidity event that
might take considerable time to resolve. This feat can be hard to accomplish at the retail level. While the bank needs 3- or
5-year CD terms, its local customers are probably balking at six months. QwickRate enables the bank to overcome the
funding gap – and at a pace and price it can dictate.
Low Marginal Cost of Funds – Always Better Than Re-pricing
It is not unusual in the banking industry for institutions to incur overhead costs reaching 15-25% of any deposit coming
in the door. When deposits generated in the local market by individual customers are compared with CDs placed in
QwickRate, analysis reveals that QwickRate offers a definite cost advantage to the bank. Deposits generated in QwickRate
will almost always be much cheaper than if the bank were to re-price its products and give every local depositor a raise they
did not request. Mullins adds that using marginal cost of funds analysis as an effective pricing tool can help banks realize
favorable net interest margins through QwickRate, regardless of the prevailing rate environment.
Investing Surplus Funds – Another Option for Bank Subscribers
With 25 years serving financial institutions, QwickRate offers community banks, thrifts, and credit unions a viable source
of funding diversity at an attractive price. In addition to accepting deposits, these institutions can also invest surplus funds
through QwickRate. According to Mullins, the marketplace supports financial institutions with a wealth of information for its
subscribers, and provides more quarters of data than any other Internet CD source he has seen.
For More Information
Additional details about the QwickRate marketplace are available at www.qwickrate.com
or by calling 800.285.8626.
www.qwickrate.com
800.285.8626