The Holy Grail of Share Growth?

Rather than combat the decline in share growth, some institutions are adopting a “wait and see” attitude. Others, however, are taking a more pro-active approach.


In the year ending June 30, 2005, the credit union industry grew its shares by only 4.2 percent, the second lowest growth rate in 10 years … and it is not looking any better. According to the third quarter data from Callahan & Associates’ First Look Program, only two of the top 10 credit unions by asset size, (BECU and The Golden 1) grew their shares on an annual basis at a higher rate this year as compared to last year and half experienced single-digit or negative growth.

Conversely, banks and S & L’s experienced 8.5 percent deposit growth during the same period. The overall deposit market for banks and S & L’s reached a record-high $6.5 trillion last year, driving credit unions’ market share down to 8.98 percent (from a high of 9.46 percent in June 2002).

So what is the problem?

Actually, there are many. Several factors have contributed to the decline in share growth:

  • Three-fourths of the industry grew its shares less than the 4.2 percent average.
  • Membership growth declined to 1.6 percent and credit unions added only 1.4 million new members in 2005 compared to 2.5 million in 1995.
  • A rising stock market combined with low interest deposit yields has persuaded members to invest their money elsewhere.
  • Consumers spent more money than they saved – the personal savings rate has steadily declined to -0.4 percent as of September 2005 from a high of 4.7 percent in March 1998.
  • Fed Funds grew 10 times faster than credit unions’ cost of funds between June 2004 and June 2005.  Market-priced share certificates have been the star amongst the share products, increasing 14.7 percent while credit unions are having difficulty attracting core deposits.
  • Margin pressures, as the gap between Fed Funds and 10-year Treasury Rate has closed to 48 basis points as of December 2005 from 366 basis points in April 2004.
  • Increased pricing competition from other financial institutions.

Rather than combat the decline in share growth, some institutions are adopting a “wait and see” attitude and allowing their rates to lag behind fed funds, despite the recent incremental increases. Others, however, are taking a more pro-active approach

Pacific Service Credit Union ($1.0 billion in assets in Walnut Creek, CA)
Pacific Service grew its shares 0.1 percent in the 12 months ending September 30, 2005 and decided to establish new programs to attract new money and reward members for their loyalty including  

  • Bonus Rate Program The program will calculate the interest earned on deposits between January 1 and October 31, 2006 and add an additional five percent on existing deposits and new money and new money in a 6-month CD.
  • Moola Account A 15-month CD that pays 4.5 percent APY and allows members to add money during the life of the CD in specific increments.  

Corporate America Family Credit Union ($618 million in assets in Elgin, IL)
Corporate America Family has a specific program for both new and current members. For new members, the credit union offers a 50 basis point bonus dividend on its money market and share certificate accounts. For its current members, the credit union has been developing a relationship-based pricing model that is takes into account:

  • Length of membership (20 percent)
  • Services per member (40 percent)
  • Aggregate share and loan balances (40 percent)



Jan. 23, 2006


  • It will be interesting to track the results over the next 12 months at the above mentioned CUs and determine if these tactics showed results.