Balance sheet growth in credit unions is very seasonal - the first quarter
is typically strong for share growth, while the third quarter is often a peak
lending period. As such, it's no surprise that third quarter loan growth outpaced
share growth 3.8% to 1.1%. However, this slowdown in share growth seems different
from recent seasonal slowdowns because there may be more external economic factors
Credit unions have grown shares at a double-digit rate for the past three years.
Much of this growth was attributed to a shaky stock market that made the safety
of insured savings products more appealing. Over the summer, the stock market
began an incline, and the third quarter economic figures were very strong with
an 8.2% annualized GDP growth rate. This strong economic performance may have
been a factor in the slowdown in deposit growth as members were more willing
to move towards uninsured investments.
When external forces limit new deposits, credit unions rely more on growth
from internal sources especially dividends paid on current accounts. In the
third quarter dividends paid to members were 42% of new share balances, up from
21% in the second quarter and 10% in the first quarter. The scatter graph below
plots all credit unions over $50 million in assets correlating their third quarter
share growth with the average share balance held at the credit union.