Core Deposits Post Double-Digit Growth in Third Quarter

Growth in three key loan categories drives a 5.6% annual portfolio increase.


Consumer spending is steadily rising; however, saving money is still a top priority for many individuals. According to the Bureau of Economic Analysis, the personal savings rate increased to 5.8% in September of 2010. For credit unions, that increased savings has translated into steady deposit growth.

As of September, credit unions’ share portfolio hit $790.7 billion. This represents an annual increase of 5.6%. In June 2010, share portfolio growth hit a record high of 10.2%, and in the past 12 months, credit unions have added $41.8 billion in new deposits. This is the second largest increase in volume reported over the past seven years.

Growth in the share portfolio is driven largely by core deposits, with each of the three core deposit categories — money market, share drafts, and regular shares — posting double-digit growth. Money market shares increased at the fastest pace, up 13.5% over the past 12 months. Share drafts also posted a strong increase, as balances rose 11.4% from the previous September. Regular shares rounded out the core deposit categories, reporting a 10.0% growth rate at the end of the third quarter.

12-month Deposit Growth for all U.S. Credit Unions as of 3Q2010

The remaining share categories are a mixed bag. IRA & Keogh accounts increased 5.3% during the year, but share certificate balances actually declined over the past 12 months, down 5.6%. This decline marks the sixth consecutive quarter of declining certificate balances; low interest rates have made consumers wary of longer term deposits.

Deposit growth will likely remain strong at the nation’s 7,556 credit unions, so the next challenge will be how to use those deposits to meet member needs and drive revenue for the credit union. As investment yields also feel the pressure of low interest rates, credit unions will have to get more creative in reintroducing growth into their loan portfolios to combat slowing demand and rising levels of competition in the market at large.