Americans saved 4.2% of their income in the first quarter of 2009, a remarkable increase over the near zero rate from the first quarter of 2008. The first quarter normally sees significant inflows due to year-end bonuses and tax refunds. With continuing economic instability, though, consumers are starting, or increasing their savings plan. Additionally, bank failures and a falling stock market throughout 2008 resulted in a consumer flight to safety and quality. Credit unions across the country have seen record share growth due to the confluence of events.
Credit Unions See Strong Growth in all Share Categories
Callahan's First Look program now has first quarter data from approximately 80% of the industry's asset base. Those credit unions show extraordinary share growth, reaching 9.9% growth in total shares over the past 12 months, higher than the previous year’s growth of 7.7%. Share growth is typically driven by one or two areas. However, this quarter share growth is strong across all categories:
- Share drafts and regular shares increased 4.9% and 10.6%, respectively, over their 2008 levels.
- Members sought out liquid funds to stash cash: money market accounts increased 17.2% annually in First Look credit unions, down slightly from 2007 – 2008 growth of 17.7%.
- With concerns about the stock market, members also increased their insured retirement fund balances. IRA and Keogh accounts increased to $57.6B, a 17.5% jump over March 2008 which saw 12.4% growth over March 2007. While these accounts only comprise 9.8% of total shares, members are looking for the safety and, as such, turning to their credit unions.
- With historically low interest rates, fewer members put money into share certificates. 12- month growth slowed to 5.0% after the same set of credit unions saw 12.6% growth in share certificates from the first quarter of 2007 to the first quarter of 2008.
One Credit Union's Example
Navy Army Federal Credit Union ($728M in Corpus Christi, TX) saw member shares increase by an outstanding 37.4% over the first quarter of 2008. The average share balance increased by 18.9%, indicating the credit union had a solid mix of increasing balances from existing members and transfer balances from new members. Wayne Vann, CEO, remarked, "We did lower our share rates three times in March in an effort to slow growth. But a lot of the growth was momentum from our fall campaign focused on safety and soundness. The larger community viewed us as a resource."
How are you using current market conditions to build new relationships and deepen existing ones? Post your comments here or read case studies in Credit Union Strategy and Performance.