Penfed Rates for Jan 27-Feb 23

[ESRBob]

Just spoke with them about my new account and she told me the new rates over the phone -- they are down a little but not too much --

4 Yr APY is now 4.65% (vs 5.0% until today)
5 Yr APY is now 5.0% (vs 5.25% until today)
(sorry I didn't get the other rates -- you can call them at 1-800-247-5626)

my dealings with these people are so comfortable and refreshing that I'm trying to figure out if its a huge scam to get us to shovel all our money to them. I guess regular banks have gotten me 'trained' so well to expect awful service, awful rates and zero flexibility... I keep trying to figure out how Penfed can make money being so nice, but maybe that's the answer? Or is there some sort of federal subsidy to them for providing these 'services' to our armed forces?

Thanks Martha for sharing the Penfed secret with us all!

 

[Martha]

Re: Penfed Rates for Jan 27-Feb 28

It wasn't me--someone else here started it quite a while ago.

Martha

 

[ESRBob]

Re: Penfed Rates for Jan 27-Feb 28

Oops,
I meant MJ -- I think that was our original source.

 

[brewer12345]

Re: Penfed Rates for Jan 27-Feb 28

I don't think there is a scam going on here. I looked at their financials before jumping in and in my professional opinion, they are a solid, healthy, profitable institution. If they ever converted to a banking charter and went public, I would be lining up to buy stock.

So why are they offering these rates? I can think of a couple of reasons:

- Perhaps they have mucho loan growth going on and need to attract funds in order to make profitable loans. Considering that they have a heavy tilt of military personnel in their client base, I could believe that a lot of soldiers are in need of ready cash during deployment or with deployment imminent.

- Maybe they are trying to hedge against higher rates. There are several ways to do this, but if you try using derivatives or capital market solutions, you must pay the piper and typically take a lot of credit risk to your counterparty. Instead, perhaps Pen Fed simply chooses to spend the money on slightly raes and bring in some new depositors. Heck, I'd look at them now if I needed a car loan, HELOC, etc., since their rates are good and the service seems straight-up.

 

[malakito]

Re: Penfed Rates for Jan 27-Feb 28

If it's a scam, they have me taken. They've got a mortgage of mine, which incidentally they're amortizing more quickly than Quicken thinks it should (i.e., every month I have to go into Quicken and increase the amount that was credited to principal and decrease the amount that was credited to interest.). Fine by me.

malakito.

 

[johnblake]

Re: Penfed Rates for Jan 27-Feb 28

I don't think there is a scam going on here. I looked at their financials before jumping in and in my professional opinion, they are a solid, healthy, profitable institution. If they ever converted to a banking charter and went public, I would be lining up to buy stock.

But aren't they non-proft? They appear to be organized like Vanguard, the members are the owners. This may explain why that offer excellent rates and services. Their board of directors are volunteers! I don't know of any banks that can match that for low overhead.

 

[brewer12345]

Re: Penfed Rates for Jan 27-Feb 28

But aren't they non-proft?  They appear to be organized like Vanguard, the members are the owners.  This may explain why that offer excellent rates and services.  Their board of directors are volunteers!  I don't know of any banks that can match that for low overhead.

No they are not non-profit. Pen Fed is owned by the members, but is still a for-profit business. If you believe otherwise, take a look at their income statement. It just so happens that their customers are also their owners, and therefore ultimately entitled to a share of the profits. It is very similar to a mutual insurance company, like State Farm or MassMutual.

 

[johnblake]

Re: Penfed Rates for Jan 27-Feb 28

I read the Annual Report which states: "we do not return a profit to investors in the company. We return our profit to "you" in terms of low loan rates and high investment rates".

This led me to think they are a non-profit (but I don't know much about corporate organization). I certainly wouldn't want to be an investor (other than a member).

Bank of America pays their shareholders a 4% dividend. The CEO was paid almost $40 Million last year! It doesn't surprise me that they can only afford to pay 3.5% on a 5 year CD.

 

[ESRBob]

Re: Penfed Rates for Jan 27-Feb 28

I read the Annual Report which states: "we do not return a profit to investors in the company. We return our profit to "you" in terms of low loan rates and high investment rates".

They made 90 million in 2003 even _after_ giving people all those nice rates. Retained earnings seem to be in the 700 million territory. So I'm not sure members will ever see that profit, but it's nice to know it is there, and maybe earnings on it are subsidizing rates further still.

I wasn't seriously considering they aren't 100% up-and-up. I am very impressed with them and have sent them a big check for CDs as their newest member.

I think John Blake may have hit on the real reason when citing B of A's CEO salary of 40 million. Will we ever get to the point where everybody wants their $ in places like vanguard and PFCU -- orgs where shareholders are not inherently in confllict with our needs as savers/investors? Bogle certainly had that vision when he set up Vanguard, but the rise of credit unions could be the newest evidence this trend has legs.

 

[MJ]

Re: Penfed Rates for Jan 27-Feb 28

Oops,
I meant MJ -- I think that was our original source.

Hey ESRBob,

I just scheduled sex change for 2006 then you will be able to call me Martha

but

for now it's just good ol' MJ, thank you very much!

 

[Nords]

Mortgage math.

They've got a mortgage of mine, which incidentally they're amortizing more quickly than Quicken thinks it should (i.e., every month I have to go into Quicken and increase the amount that was credited to principal and decrease the amount that was credited to interest.).

Malakito, I've seen this before.  See if this is caused by your Quicken mortgage account being set to compound its interest daily instead of monthly.

From the top menu bar, select "Property & Debt" | "Loans" or CTRL-H, then if necessary select "Choose Loan", click the "Loan Summary" tab and check the "Compounding Period" window.  

I don't want to discuss how I became so knowledgable on this symptom.

 

[John Galt]

Hello Nords. Nor do we wish to hear it

JG

 

[REWahoo]

Re: Penfed Rates for Jan 27-Feb 28

No they are not non-profit. Pen Fed is owned by the members, but is still a for-profit business. If you believe otherwise, take a look at their income statement. It just so happens that their customers are also their owners, and therefore ultimately entitled to a share of the profits. It is very similar to a mutual insurance company, like State Farm or MassMutual.

Brewer, Penfed isn't a non-profit organization, nor is it for profit. As a credit union, PenFed's status is "not-for-profit". The Credit Union National Association describes it as follows:

"A credit union is a cooperative financial institution, owned and controlled by the people who use its services. These people are members. Credit unions serve groups that share something in common, such as where they work, live, or go to church. Credit unions are not-for-profit, and exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates.

What makes a credit union different from a bank or savings & loan? Like credit unions, these financial institutions accept deposits and make loans--but unlike credit unions, they are in business to make a profit."

Most credit unions also do not pay taxes due to their not-for-profit status.

REW

 

[brewer12345]

Re: Penfed Rates for Jan 27-Feb 28

Brewer, Penfed isn't a non-profit organization, nor is it for profit.  As a credit union, PenFed's status is "not-for-profit". The Credit Union National Association describes it as follows:

"A credit union is a cooperative financial institution, owned and controlled by the people who use its services. These people are members. Credit unions serve groups that share something in common, such as where they work, live, or go to church. Credit unions are not-for-profit, and exist to provide a safe, convenient place for members to save money and to get loans at reasonable rates.

What makes a credit union different from a bank or savings & loan? Like credit unions, these financial institutions accept deposits and make loans--but unlike credit unions, they are in business to make a profit."

Most credit unions also do not pay taxes due to their not-for-profit status.

REW

Yup. As I said, a CU is very, very similar to a mutual insurer or thrift.