Growing Share Balances from Within the Credit Union

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 influencing it.

 
 

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 influencing it.

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.

 

 

 

Dec. 15, 2003


Comments

 
 
 
  • We haven't seen this trend as yet.
    Anonymous