Strong Credit Union Share Growth: More than Just a Flight to Safety

Share balances grew by the largest amount in a decade over the last 12 months, an increase owed to consumers re-focusing on thrift and credit unions building consumer trust.

 
 

Members directed a record amount of savings to credit unions over the past 12 months. Share balances grew $58.1 billion between the June 2008 and June 2009, the largest increase in this decade. Certainly one very large contributing factor to this growth is the increasing U.S. personal savings rate, which reached a 15-year high of 6.9 percent in May as consumers re-focus on thrift in the uncertain economic environment.

Although the savings rate is one factor in the growth in credit union share balances, the increase also reflects the trust advantage credit unions enjoy over larger competitors. Recent consumer surveys indicate that trust in a financial institution is now a deciding factor when making a choice about where to maintain a relationship. Unlike a loan, savings decisions are determined by the consumer.

While tight credit conditions continue to make headlines, credit unions recorded their highest loan volume ever in the first six months of 2009. Credit unions are meeting the needs of millions of consumers and proving to be sources of economic stimulus for communities across the country.

The industry's impact is increasingly noted in the public media. National publications including The Wall Street Journal and BusinessWeek, along with media outlets such as CNBC, have run stories on credit union success in the current environment. These examples, along with many stories from local newspapers, radio and television broadcasts, are leading to higher visibility among consumers. Accelerating member growth and an increased presence in key business segments are the result, with national market share in mortgage and auto lending reaching new highs in 2009.

Credit Union Share Offerings Remain Competitive

While trust is a more significant factor in today's market, value continues to be important. Credit unions' 2.12 percent cost of funds indicates their rates remain competitive. All share categories are posting solid growth for the 12 months ended June, with the $746.2 billion portfolio up 8.4 percent, the highest increase on an annual basis since 2004

Core deposits are a particular strength, as regular shares and share drafts each posted increased growth rates versus a year ago. In addition, money market balances are up 15.2 percent. The $19.6 billion increase in this category over the past year is the largest within the share portfolio. One example of credit union success in building value in core deposit products was featured in an August USA Today article as Addison Avenue FCU ($2.4B, Palo Alto, CA) CEO Benson Porter discussed their high interest rate checking account program.

The record share growth is resulting in higher liquidity for credit unions as the loan-to-share ratio has fallen to 77.5 percent, the lowest mid-year result since 2005. The $268.3 billion investment portfolio provides ample funds for continued lending. While a lack of liquidity was a critical element in many of the institutional failures over the past year, credit unions remain in a strong position to use their balance sheet to take advantage of opportunities in the market.

 

 

 

Sept. 14, 2009


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