Credit unions are competing in a rising interest rate environment during a period of
slowing balance sheet growth, says Chip Filson, president of Callahan
& Associates, Inc. Third quarter share growth dropped from 5.1% -- down from
16.6% in the second quarter of 2002.
Filson analyzed the current state of the industry last week at Callahan’s
quarterly third quarter Trendwatch call. Credit unions are in a period of slowing
balance sheet growth – the lowest share growth since Dec. 2000, he said. See
One reason Filson cited for slowing share growth is that, as of Sept. 30, credit
unions have barely adjusted their rates. The Fed funds rates increased 50 basis
points since June, but money market rates for credit unions only rose five basis
points. "Only 30% of credit unions that offer money market funds have moved
up from the June 30 level and 10% moved down," said Filson.
Source: Callahan & Associates, Sept. 30, 2004
Slowing membership growth creates added challenge
Slowing membership growth is also putting a strain on share growth. Nearly half
of the nation’s credit unions lost members over the 12-month period ending Sept.
30, 2004. With only 2,817 of the 9,311 credit unions growing membership by 2%
or more, the rate of membership growth continued to decline.
Callahan analysts recommend credit union executives seeking ways to achieve
growth in the current environment examine:
- Why is share growth still lagging behind loan growth?
- The criteria that share pricing decision is based upon to address liquidity
and ALM concerns
- Adjusting share deposit rates to manage the balance sheet
Union 12-month Share Growth
All U.S. Credit Unions as of September 30, 2004
3/02 6/02 9/02 12/02 3/03 6/03 9/03 12/03
3/04 6/04 9/04
Source: Callahan & Associates, Sept.