Share Growth Shifts and Surges in 2007

Credit unions experienced the fastest growth in share balances in 4 years as higher yielding accounts drove much of the growth

 
 

Share growth is one area where credit unions experienced success in 2007 as members directed their deposits to credit unions at the fastest pace in four years. Credit unions share balances rose 5.1 percent during 2007 and the industry experienced the fastest deposit growth since 2003.

As of year-end, the average share balance for all credit unions was $7,308, increasing 3.8 percent over 2007. However, this increase is slightly offset when we also observe that cost of funds during the same period increased 3.2 percent. Credit unions returned more to their members despite a continued decline in short term interest rates.

The most interesting trend that can be observed by looking at credit union shares in 2007 is the shift in member preferences toward higher yielding accounts. Higher yielding certificates and money market accounts drove this shift with 14.2 percent and 10.6 percent annual increases, respectively. IRA balances also posted strong growth, up 9.5 percent over the year. Regular shares and share drafts both declined as members shifted funds to higher yielding options.

Although share draft balances declined 2.7 percent over the course of the year, the number of credit union checking accounts exceeded 40 million for the first time. Checking usage among credit union members continues to rise, as a 45.2 percent penetration rate at year-end is the highest ever recorded for the industry.

Deposits are a major focal point for credit unions on a year-round basis, but are particularly important around this time of year. As we move through tax season, members will soon be receiving their refunds if they have not already. Also keep in mind that members will be receiving an additional Federal tax rebate check June. Credit unions need to work hard to capitalize on this opportunity for deposits. Develop a strategy to capture these deposits now and implement it before your members receive their checks (perhaps develop some ads or signage specifically to ensure that members turn to the credit union and know what options are available before they receive their rebate). While many credit unions offer higher rates in order to drive deposit growth, there are other innovative options available for credit unions looking to grow their share portfolio.

With the U.S. economy experiencing turbulence and continuing volatility in the stock market, many individuals are looking for a safe place to invest their money. This is an excellent opportunity for credit unions to step up and position themselves as a safer financial alternative.

 

 

 

 

March 17, 2008


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