PFFCU’s goal with our deposit and loan rates is to use our financial strength to offer members the best deposit and loan rates possible. PFFCU’s business philosophy is to share its success with the members that have enabled us to achieve that success.

What do we do with the money when it is deposited by members?
We receive deposits from our members in the form of Savings, Checking, Money Market Accounts, Certificates, and IRAs. Our first goal with the deposits we receive is to make loans to members. Our loans to members consist of Mortgages, Home Equity Loans, Auto Loans, and Unsecured Loans (PLOC, Signature, and VISA).

Because our members have more deposits with us than loans, every new dollar deposited in PFFCU is currently added to our investment portfolio. We are very conservative in our investments, choosing only those investments that have a government guarantee and less than a 3-year maturity or interest rate reset. These guaranteed investments are only earning between 0.20% and 0.50% as of January 2012. Currently, the Federal Reserve Bank’s strategy to spur economic growth is to discourage consumers from saving by driving interest rates toward zero, which the Federal Reserve hopes will encourage consumer spending and borrowing. In January of 2012, The Federal Reserve Bank stated that it expects econcomic conditions to “warrant exceptionally low levels for the federal funds rate at least through late 2014” The Federal Resverve Bank’s strategy will drive down PFFCU’s investment yields and correspondingly impact PFFCU’s deposit rates.

Historically, our average Certificate rate has equaled our average yield on investments so that PFFCU passed through all of its income from investments to members in the form of higher Certificate rates. Our deposit rates have to reflect what PFFCU can earn on its investment portfolio so that PFFCU remains financially sound.

What will happen to deposit rates in the future?
PFFCU doesn’t have an economic crystal ball; therefore we don’t manage our balance sheet based upon a forecast of interest rates and the economy. We plan for different scenarios and respond accordingly as economic events unfold.

Comment: By Jim DeMasi, Chief Fixed Income Strategist, Stifel Nicolaus Investment Firm 8/10/2011
"The Fed’s message was crystal clear: the central bank will do everything in its power to ensure that cash and cash-like instruments earn decidedly negative real rates of return for the foreseeable future. The Fed’s signal that short term yields will remain well under the rate of inflation indefinitely was meant to provide a powerful incentive for investors to take greater risk in pursuit of positive real rates of return."